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Utility Stocks Q2 Earnings Due on Jul 26: NEE, DTE, WEC

Zacks Equity Research
Updated

The Q2 earnings season is gradually unfolding, with nearly 800 companies – including 183 S&P 500 members – expected to come up with earnings results this week. As of Jul 21, 97 S&P 500 members came up with earnings results. Total earnings for these companies are up 8.4% from the same period last year on 5.1% higher revenues, with 78.4% beating EPS estimates and 72.2% beating revenue estimates.

Combining results of the reported index members (97 members) with the remaining 403 members of S&P 500, earnings are estimated to improve 8.6% on 4.7% higher revenues.

Let us now focus on the utility sector, which is characterized by its defensive nature and domestic orientation. Earnings are expected to drop 2.9% this season.

The utility sector is capital-intensive. These companies need huge capital to set up generation facilities, and transmission and distribution infrastructure. They also require considerable funds to maintain and upgrade the existing systems in order to meet emission-control standards. Utilities have been benefiting from the rock-bottom interest-rate environment. However, the Federal Reserve has raised rates twice in 2017 – in March and June. This will definitely hurt the utilities. The Fed has maintained its forecast for one more rate hike in 2017.

However, the U.S. coal-based utilities did get a respite with President Trump’s decision to repeal the Climate Power Plan. Moreover, Trump has walked out of the Paris Climate Agreement.    

Five out of the 16 sectors in the Zacks coverage universe are expected to witness an earnings decline this season. Read more details in our weekly Earnings Preview .

Let’s take a look at a few utilities that are scheduled to report quarterly numbers on Jul 26.

NextEra Energy Inc. NEE reported a positive earnings surprise of 12.18% in the previous quarter. The company currently holds a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NextEra Energy’s Earnings ESP is  0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.74. According to our proven model, stocks with the combination of a positive ESP and a Zacks Rank #1, 2 or 3 (Hold) have increased chances of beating estimates.

NextEra Energy, Inc. Price and EPS Surprise

NextEra Energy, Inc. Price and EPS Surprise | NextEra Energy, Inc. Quote

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NextEra Energy is unlikely to beat earnings because it does not have the right combination of the two key ingredients (read more: NextEra Energy Q2 Earnings: What's in the Cards?).

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

DTE Energy DTE reported a positive earnings surprise of 14.01% in the previous quarter. The company currently carries a Zacks Rank #3.

DTE Energy Company Price and EPS Surprise

DTE Energy Company Price and EPS Surprise | DTE Energy Company Quote

DTE Energy’s Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 93 cents.

Hence, DTE Energy is unlikely to beat earnings as it does not have the right combination of the two key ingredients (read more: DTE Energy to Report Q2 Earnings: What's in Store?).

WEC Energy Group WEC reported negative earnings surprise of 5.66% in the prior quarter. The company currently carries a Zacks Rank #3.

WEC Energy Group, Inc. Price and EPS Surprise

WEC Energy Group, Inc. Price and EPS Surprise | WEC Energy Group, Inc. Quote

The Earnings ESP for WEC Energy is -1.70%. This is because the Most Accurate estimate stands at 58 cents while the Zacks Consensus Estimate is pegged at 59 cents. The company is unlikely to beat earnings as it does not have the right combination of the two key ingredients (read more: WEC Energy to Report Q2 Earnings: What's in the Cards?).

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

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WEC Energy Group, Inc. (WEC) : Free Stock Analysis Report
 
NextEra Energy, Inc. (NEE) : Free Stock Analysis Report
 
DTE Energy Company (DTE) : Free Stock Analysis Report
 
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