SCANA Corp (SCG) in Q1 Earnings: Disappointment in Store?

Integrated energy company, SCANA Corporation SCG is expected to report first-quarter 2017 earnings on Apr 27, before the market opens.

Last quarter, the company reported earnings of 87 cents per share that missed the Zacks Consensus Estimate of 93 cents. The quarterly earnings, however, increased from year-earlier earnings of 69 cents per share. Let’s see how things are shaping up prior to the announcement.

Scana Corporation Price and EPS Surprise

 

Scana Corporation Price and EPS Surprise | Scana Corporation Quote

Factors Likely to Influence this Quarter

SCANA Corp. is well positioned to benefit from a positive regulatory environment as it has a low risk business with outstanding customer growth and operational efficiency. These are favorable for stable cash flow generation and growth.

Another positive for shareholders is SCANA Corp.’s utility business mix. The majority of the company’s earnings come from the regulated electricity and natural gas utilities business. Given its strong fundamentals, the company is poised to achieve significant share price appreciation and earnings growth in the to-be-reported quarter.

Moreover, SCANA Corp.’s nuclear expansion project is a catalyst for future earnings growth. Given the company’s financing plan, construction budget and schedule, we believe that it will be able to fund its nuclear expansion project. Management expects 2017 earnings to be in the range of $4.15–$4.35 per share. It expects to achieve the target through industrial expansion and continued customer growth. As the company's capex escalates with the new nuclear projects and the investments are recognized in the rate base, its regulated earnings power is expected to improve.

However, we are concerned about SCANA Corp.’s high debt level and the overall business risks associated with the nuclear generation construction project. The last nuclear generation construction cycle severely affected the stocks of numerous electric utilities. As expected, this generates a legitimate level of investor anxiety.

In the last three months, shares of SCANA Corp. lost 3.1%, while the Zacks categorized Utility-Electric Power industry has registered 5.8% increase.

Earnings Whispers

Our proven model does not conclusively show that SCANA Corp. will beat estimates this quarter. That 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. That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.37. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: SCANA Corp. carries a Zacks Rank #4 (Sell). Please note that the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.  

Stocks to Consider

While an earnings beat looks uncertain for SCANA Corp., here are some firms that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat this quarter:

Williams Partners L.P. WPZ has an Earnings ESP of +12.50% and a Zacks Rank #3. The partnership is expected to release earnings on May 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chesapeake Energy Corp. CHK has an Earnings ESP of +5.00% and a Zacks Rank #3. The company is expected to release earnings on May 4.

Southwestern Energy Company SWN has an Earnings ESP of +5.88% and a Zacks Rank #3. The company is expected to release earnings on Apr 27.

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Scana Corporation (SCG): Free Stock Analysis Report
 
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Chesapeake Energy Corporation (CHK): Free Stock Analysis Report
 
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