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Utility Stocks' Earnings to Watch on Oct 25: AEP, FE & More

The third-quarter earnings season is in its early stage, with 84 S&P 500 members having already reported their respective quarterly results (as of Oct 19). Total earnings for these companies are up 19.2% from the same period last year on 8.4% higher revenues. Per the latest Earnings Preview report, overall third-quarter earnings for all S&P 500 members are expected to be up 19% on 7.2% revenue growth.

This week is going to be one of the busiest in this earnings season, with more than 600 companies slated to report quarterly results, including 154 S&P 500 members. 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 third-quarter earnings are expected to increase 6.7% year over year on 0.5% 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, coupled with effective management and control of expenses through the introduction of new technology, all of which should positively impact third-quarter earnings.

These utilities do have their share of challenges such as a rising debt level, stringent regulations and the hurricane season, all of which can wreak havoc on infrastructure. Rising interest rates (the Federal Reserve hiked interest rates in September, marking the eighth increase since December 2015) make bonds a strong investment option, as interest rate hikes increase the utilities' cost of capital, impacting margins and comprising on their ability to pay or hike dividend rates.

Unemployment rate in the United States during the end of third quarter touched 3.7%. This historic low level of unemployment boosted the demand for new housing units and in turn the requirement for utility services. Per a U.S. Energy Information Administration ("EIA") report, total electricity generation in the United States will touch 11.397 billion kWh per day in 2018, up 8.5% year over year, while 2018 total retail electric sales will reach 10.38 billion kWh a day, improving 2.9% on a year-over-year basis.

Let's take a look at some Utility stocks that are scheduled to report third-quarter 2018 earnings on Oct 25 and find out how things are shaping up prior to the announcement.

FirstEnergy CorporationFE delivered an average positive earnings surprise of 4.74% in the last four quarters. Presently, FirstEnergy is a fully-regulated company, which is expected to benefit from its modernization drive 'Energizing the Future'. The company will benefit from improving economic conditions in its service territories. (Read more: FirstEnergy to Report Q3 Earnings: Is a Beat in Store? )

FirstEnergy Corporation Price and EPS Surprise

FirstEnergy Corporation Price and EPS Surprise | FirstEnergy Corporation Quote

FirstEnergy has an Earnings ESP of +0.78% and a Zacks Rank #2 (Buy), which is a favorable combination that indicates 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.

American Electric Power Company, Inc . AEP delivered an average positive earnings surprise of 3.08% in the last four quarters. Improving economic conditions in its service territories and new rates are expected to drive its results in the to-be-reported quarter.

American Electric Power Company, Inc. Price and EPS Surprise

American Electric Power Company, Inc. Price and EPS Surprise | American Electric Power Company, Inc. Quote

American Electric Power has an Earnings ESP of +2.46% and a Zacks Rank #1, which is a favorable combination, indicating a likely positive earnings surprise this season. (Read more : Is a Beat in Store for American Electric Q3 Earnings? )

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

CMS Energy CorporationCMS delivered an average positive earnings surprise of 8.67% in the last four quarters. Cost management, new electric rates and ongoing investment in infrastructures are expected to drive its results in the to-be-reported quarter.

CMS Energy Corporation Price and EPS Surprise

CMS Energy Corporation Price and EPS Surprise | CMS Energy Corporation Quote

CMS Energy has an Earnings ESP of +2.11% and a Zacks Rank #1, which is a favorable combination, indicating a likely positive earnings surprise this season. (Read more: CMS Energy to Report Q3 Earnings: Is a Beat in Store? )

Xcel Energy Inc.XEL delivered an average positive earnings surprise of 6.38% in the last four quarters. New rates and improving economic conditions in its service territories are expected drive results in the quarter to be reported. The company will also benefit from rising electric and natural gas customer count.

Xcel Energy Inc. Price and EPS Surprise

Xcel Energy Inc. Price and EPS Surprise | Xcel Energy Inc. Quote

Xcel Energy has an Earnings ESP of +0.34% and a Zacks Rank #2, which is a favorable combination that indicates a likely positive earnings surprise this season. (Read more: Xcel Energy to Report Q3 Earnings: Is a Beat in Store? )

SCANA CorporationSCG delivered a positive earnings surprise of 13.56% in the last reported quarter.

SCANA Corporation Price and EPS Surprise

SCANA Corporation Price and EPS Surprise | SCANA Corporation Quote

The company is moving ahead with its merger deal with Dominion Energy. Hurricane Florence hit the service territory of SCANA in September, which could have an adverse impact on its third-quarter earnings.

SCANA has an Earnings ESP of 0.00% and a Zacks Rank #2, which does not point toward an earnings surprise this season. (Read more: SCANA to Report Q3 Earnings: What's in the Cards? )

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American Electric Power Company, Inc. (AEP): Free Stock Analysis Report

FirstEnergy Corporation (FE): Free Stock Analysis Report

CMS Energy Corporation (CMS): Free Stock Analysis Report

Xcel Energy Inc. (XEL): Free Stock Analysis Report

SCANA Corporation (SCG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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