Can Favorable Weather Drive PG&E Corp (PCG) Q3 Earnings?

PG&E Corporation (NYSE:PCG) is set to report third-quarter 2017 results on Nov 2, before the market opens.

Last quarter, the company posted a positive earnings surprise of 8.86%. Moreover, the company surpassed the Zacks Consensus Estimate in three of the past four quarters, with an average earnings beat of 6.28%.

Let’s see how things are shaping up at the company prior to this announcement.

Factors at Play

PG&E Corp boasts a solid portfolio of regulated utility assets that offer a stable earnings base and substantial long-term growth potential.

During second-quarter earnings call, the company announced that it expects to gain 5 cents in rate base earnings during each quarters of the second half of 2017. On the contrary, general rate case revenues were adjusted in 2017, resulting in a loss of incremental tax repair benefits of roughly 25 cents annually. This is likely to impact PG&E Corp’s third-quarter earnings.

Notably, for the third quarter, the Zacks Consensus Estimate for earnings is 94 cents, reflecting a 0.2% year-over-year dip.

Earlier, PG&E Corp reduced its 2017 capital expenditure projection range to reflect the shift in some of its gas transmission and distribution work into 2018. We can expect to see an annual decline in the company’s third-quarter capital expense once its quarterly results are released.

Moreover, in July, the company’s shareholder derivative settlement was approved by the court. The company thus expects to record a net benefit of $65 million pre-tax in the soon-to-be-reported quarter.

The company’s third-quarter business was favorably impacted by warmer-than-average temperature which prevailed in most parts of California, after a historic heat wave in June. This led to increased electricity demand, which in turn is expected to improve the third-quarter revenues.

In line with this, the Zacks Consensus Estimate for PG&E Corp’s revenues is pegged at $4.96 billion, reflecting a 3.1% year-over-year increase.

Earnings Whisper

Our proven model does not conclusively show that PG&E Corpwill beat earnings this quarter. Notably, 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. PG&E Corplacks these attributes, as mentioned below:

Zacks ESP: PG&E Corp has an Earnings ESP of -0.05%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: PG&E Corp currently carries a Zacks Rank #3, which along with a negative earnings ESP makes surprise prediction difficult.

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.

Stocks That Warrant a Look

Here are a few utility stocks which have the right combination of elements to post an earnings beat this quarter:

NiSource, Inc. (NYSE:NI) will report next quarterly results on Nov 1. The company has an Earnings ESP of +7.84% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

El Paso Electric Company (NYSE:EE) has an Earnings ESP of +3.99% and a Zacks Rank #3. The company is scheduled to report next quarterly results on Nov 1.

Avista Corporation (NYSE:AVA) has an Earnings ESP of +2.63% and a Zacks Rank #3. The company is slated to release next quarterly results on Nov 1.

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