PG&E Corporation (PCG) Q1 Earnings: What's In The Cards?

Utility company PG&E Corporation (NYSE:PCG) is set to release first-quarter 2016 results on May 4, before the opening bell. In the preceding quarter, the company had delivered a positive earnings surprise of 11.11%. Let’s see how things are shaping up for this announcement.

Factors at Play

Last September, PG&E Corporation submitted a request to the California Public Utilities Commission to boost rates by about $4 per month for an average residential customer. The rate hike will provide the utility the necessary funds to continue its work on infrastructure upgrade, strengthen and expand existing systems, and ultimately provide reliable services to its customers.

PG&E expects the commission to come to a decision by the end of 2016. Upon approval, PG&E Corporation will step up its investments in its distribution and generation businesses that will benefit its top and bottom line. The utility expects 2016 adjusted earnings from operations in the range of $3.65−$3.85 per share. In 2015, the utility posted earnings of $3.12 per share.

For the first quarter of 2016, the milder-than-expected winter will not bode well for electricity and natural gas sales. Also, a stringent regulatory climate that is coming down heavily on the age-old utilities, particularly the plants run on coal, is expected to weigh on margins.

Earnings Whispers?

Our proven model does not conclusively show that PG&E Corporation will beat earnings. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -1.32%. This is because the Most Accurate estimate stands at 75 cents, while the Zacks Consensus Estimate is pegged higher at 76 cents.

Zacks Rank: Though PG&E Corporation’s Zacks Rank #3 increases the predictive power of the ESP, we need a positive ESP to be confident of an earnings beat.

Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter.

American Water Works Company, Inc. (NYSE:AWK) has an earnings ESP of +2.17% and a Zacks Rank #3. The company is expected to release first-quarter 2016 earnings results on May 4.

Consolidated Edison, Inc. (NYSE:ED) has an earnings ESP of +0.82% and a Zacks Rank #3. The company is expected to release first-quarter 2016 earnings results on May 5.

Pattern Energy Group Inc. (NASDAQ:PEGI) has an earnings ESP of +466.67% and a Zacks Rank #3. The company is expected to release first-quarter 2016 earnings results on May 9.

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