The companies belonging to the Zacks
Utilities
sector ensure a continuous supply of electricity, potable water and natural gas and provide wastewater services to millions of customers across the United States. The sector is off to a solid start to the first-quarter earnings season, with NextEra Energy (NEE) beating estimates by 7.3%.
Per the current
Earnings Trends
report, the utility sector’s first-quarter earnings are expected to increase 9.3%, while revenues are estimated to decline 8%. Utilities is among the 10 Zacks sectors that are expected to earn more in the first quarter than the year-ago period.
Factors Likely to Impact Q1 Results
The overall improvement in economic conditions in the United States and a surge in commercial and industrial activities have been creating fresh demand for utility services despite the threat of the new variant of COVID-19. Fresh demand from the expanding customer base of the utilities is expected to have boosted their first-quarter performance.
The utilities remained focused on making systematic investments to add renewable energy sources to their generation portfolios and reduce emissions. Investments in expanding and strengthening transmission and distribution lines have been making the infrastructure more resilient and enabling utilities to provide 24X7 services to customers even during adverse climatic conditions. Large water utilities have been taking initiatives to replace old water mains to ensure uninterrupted services for customers.
Utilities have been focused on improving productivity and their cost structure through investments in digital technologies, integrating key systems and analyzing data to make proper decisions to improve overall operations. The utilities have been educating customers relating to the proper usage of electricity to reduce utility bills and things to do during emergency situations to reduce damage.
The new utility rates approved by different commissions across the United States are also likely to have positively impacted first-quarter earnings. First-quarter earnings are likely to have benefited from higher weather-related usage from customers than the year-ago period.
Picking Winners From the Utility Space
Choosing the right stock for one’s portfolio from too many participants is certainly a tough job. An easy way to streamline the list is by selecting stocks with the combination of a positive
Earnings ESP
and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Per our proprietary methodology, Earnings ESP is a determining factor for zeroing in on stocks with maximum chances of beating on earnings. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
You can uncover the best stocks to buy or sell before they’re reported with our
Earnings ESP Filter
.
Our research shows that stocks with the right combination of the two key ingredients have 70% higher chances of delivering an earnings surprise.
For investors looking to find winners, we have highlighted four Utility stocks that are poised to beat first-quarter earnings estimates.
Our Utility Bets for Q1
Camden, NJ-based
American Water Works
AWK
provides water and wastewater services to millions of customers across the United States. American Water continues to expand operations in the United States through organic and inorganic methods. This utility makes consistent investments to upgrade and maintain the aging water infrastructure. Effective cost management and new water rates effective in its service territories are likely to have boosted first-quarter earnings.
American Water Works has an Earnings ESP of +1.00% and a Zacks Rank #3. You can see
the complete list of today’s Zacks #1 Rank stocks here
.
American Water Works is scheduled to report quarterly results on Apr 27.
American Water Works Company, Inc. Price and EPS Surprise
American Water Works Company, Inc. price-eps-surprise
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American Water Works Company, Inc. Quote
Milwaukee, WI-based
WEC Energy Group
WEC
provides natural gas and electricity to customers. First-quarter earnings are likely to have benefited from its ongoing regulated investment and improvement in the demand for utility services from commercial and industrial (C&I) customers. On an average, more than 60% of WEC’s electricity is sold to the C&I group.
WEC Energy has an Earnings ESP of +0.34% and a Zacks Rank #3. WEC Energy is scheduled to report quarterly results on May 2.
WEC Energy Group, Inc. Price and EPS Surprise
WEC Energy Group, Inc. price-eps-surprise
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WEC Energy Group, Inc. Quote
Tulsa, OK-based
ONE Gas, Inc.
OGS
, along with its subsidiaries, supplies natural gas to customers in the United States. First-quarter earnings are likely to have gained from strong demand from residential customers and the expansion of its overall customer base.
ONE Gas has an Earnings ESP of +1.22% and a Zacks Rank #3. ONE Gas is scheduled to report quarterly results on May 2.
Richmond, VA-based
Dominion Energy Inc.
D
provides electric and natural gas services to millions of customers in the United States. First-quarter earnings are likely to have benefited from Dominion’s ongoing regulated investments and higher sales volumes than the year-ago period due to return to normal weather.
Dominion Energy has an Earnings ESP of +0.86% and a Zacks Rank #3. Dominion Energy is scheduled to report quarterly results on May 5.
Dominion Energy Inc. Price and EPS Surprise
Dominion Energy Inc. price-eps-surprise
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Dominion Energy Inc. Quote
Stay on top of upcoming earnings announcements with the
Zacks Earnings Calendar
.
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