Utility Stocks’ Q2 Earnings Due on Aug 1: D, EXC, ES & More

The Q2 earnings season is past the halfway mark, with total earnings of the 265 S&P 500 members that have already reported being up 23.6% from the same period last year on 10.1% higher revenues. Per out latest Earnings Preview report, overall second-quarter earnings for all the S&P 500 members are expected to be up 23.6% on 8.8% revenue growth.

Let's concentrate on the domestic-focused matured Utility sector and find out how it is poised to perform this season. This sector, along with 14 of the 16 Zacks sectors, is likely to come up with improved year-over-year earnings. Currently, the Autos and the Conglomerates sector is likely to register a decline in earnings.

The Utility sector's earnings in the second quarter are expected to increase 8.2% year over year on 0.3% revenue growth, courtesy of expected stable performance by most of the utilities. Utility stocks are expected to gain from the new rates in their service territories, customer growth and effective management of expenses, all of which should have a positive impact on second-quarter earnings.

The unemployment rate in the United States during the second quarter was in the range of 3.8-4.0%. This historic low level of unemployment boosted demand for new housing units and in turn the requirement for utility services. Per a U.S. Energy Information Administration ("EIA") report, electricity demand from residential, commercial and industrial sectors during the first half of 2018 improved from the year-ago period.

However, these utilities do have their share of challenges such as a rising debt level, stringent regulations and the hurricane season, which can wreak havoc on infrastructure. Rising interest rates (the Federal Reserve hiked interest rates in June, marking the seventh increase since December 2015) make bonds a strong investment option compared with utility investment. Despite the rate hikes, we find some of the utilities fundamentally strong enough to come up with positive earnings surprise this season.

Let's take a look at some Utility stocks scheduled to report second-quarter 2018 earnings on Aug 1 and how things are shaping up prior to the announcement.

Dominion Energy D delivered a positive earnings surprise of 3.41% in the last reported quarter. Its second-quarter 2018 earnings are expected to benefit from a return to normal weather, the Cove Point Liquefaction project and absence of refueling outage at Millstone. (Read more: Dominion Energy to Report Q2 Earnings: What's in Store?)

Dominion Energy has an Earnings ESP of +0.84% and a Zacks Rank #2 (Buy), which is a favorable combination indicating a likely positive earnings surprise this season. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 or #3 (Hold) to be able to beat estimates. You can see the complete list of today's Zacks #1 Rank stocks here.

Exelon Corporation EXC delivered a positive earnings surprise of 3.23% in the last reported quarter. The company is expected to benefit from its cost management initiatives through improved efficiency and productivity.

Exelon Corporation has an Earnings ESP of +0.39% and a Zacks Rank #2, which is a favorable combination indicating a likely positive earnings surprise this season. (Read more: Is a Beat in Store for Exelon This Earnings Season?)

You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Eversource Energy’s ES earnings in the first quarter were on par with the Zacks Consensus Estimate. The company is expected to benefit from the new rates approved in Connecticut, effective May 1. (Read more: What's in the Cards for Eversource Energy in Q2 Earnings?)

Eversource has an Earnings ESP of +1.06% and a Zacks Rank #2, indicating a likely positive surprise this season.

Entergy Corporation ETR reported a negative earnings surprise of 11.45% in the last reported quarter. The company expects macroeconomic factors to boost industrial growth in its service territories, which, in turn, should improve demand for electricity. (Read more: Entergy Corp. to Post Q2 Earnings: What's in Store?)

Entergy has an Earnings ESP of +0.66% and a Zacks Rank #3, indicating a likely positive surprise this season.

Public Service Enterprise Group Inc. PEG reported a negative earnings surprise of 1.02% in the last reported quarter. The company’s results in the second quarter are likely to be impacted by the severe storms that lashed in its service territories. Storm-related expenses are likely to impact its bottom line in the to-be-reported quarter. (Read more: Public Service Enterprise Q2 Earnings: What's in Store?)

Public Service Enterprise has an Earnings ESP of -0.40% and a Zacks Rank #3, indicating a likely negative surprise this season.

NiSource Inc.’s NI earnings in the first quarter were on par with the Zacks Consensus Estimate. NiSource has a 100% regulated utility business model. The new gas rates approved at the beginning of 2018 and during the quarter are likely to have a positive impact on the company’s earnings. (Read more: NiSource to Report Q2 Earnings: What's in the Cards?)

NiSource has an Earnings ESP of -8.11% and a Zacks Rank #3, indicating a likely negative surprise this season.

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