Utilities To Report Earnings On Oct 27: XEL, CMS, SCG, IDA
Zacks Investment Research | Oct 26, 2016 07:04AM ET
The Q3 earnings season is picking up pace with 116 S&P 500 members having already reported their results. Reported earnings were up 3.3% year over year on 1.8% higher revenues. This will probably be one of the busiest weeks of this earnings season, with 810 companies (including 171 S&P members) lining up to release financial results.
For the remaining index members, projections are of a 0.1% improvement in earnings on 1.5% higher revenues despite the expectations of a 72.6% plunge in earnings on 12.2% deterioration in revenues for the Oil & Energy sector. Notably, this could be the first quarter to record positive earnings growth after five quarters of back-to-back declines.
Seven out of the 16 sectors in the Zacks coverage universe are expected to witness earnings decline this season. However, utility is among the remaining nine sectors that are expected to record growth in the positive territory this season. Read more details in our weekly Earnings Preview report.
Let us now focus on the utility sector, which is characterized by its defensive nature and domestic orientation.
Stringent emission control laws have spurred the demand for clean burning sources of energy like natural gas and renewables, lowering the usage of coal in electricity production. Per recent projections by the U.S. Energy Information Administration (EIA), the share of natural gas in the electricity generation mix will increase to nearly 35% in 2016, reflecting growing preference for the fuel Utility.
This sector is known for its capital-intensive nature. This is because these companies need huge capital for setting up generation facilities, and transmission and distribution infrastructure. They also require considerable funds for upgrading the existing systems to meet emission control standards.
Because of their capital-intensive nature, utilities have been benefiting from the rock-bottom interest rate environment. However, talks hinting at a rate hike before the end of the year could hamper the growth momentum of the sector. Nevertheless, we expect warmer-than-normal weather in the U.S. during the third quarter to boost sales to a large extent.
In the third quarter of 2016, sector earnings are expected to be up 5.7% on 4.6% higher revenues.
Let’s take a look at a few utilities that are scheduled to report quarterly numbers on Oct 27.
CMS Energy (NYSE:CMS) reported a positive earnings surprise of 28.57% last quarter. The company currently sports a Zacks Rank #1 (Strong Buy). You can see CMS Energy Likely to Beat Q3 Earnings: Here's Why ) CMS ENERGY Price and EPS Surprise IDACORP INC Price and EPS Surprise
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