Utility Stocks Q3 Earnings Roster For Oct 30: D, EIX, SRE

The Q3 earnings season is in full swing, with 229 S&P 500 members having reported their quarterly results as of Oct 26. So far, the results reflect strong momentum, in particular on the revenue front. Impressively, revenue growth is not only accelerating but an above-average proportion of companies have come up with top-line beats.

Notably, of the 48.1% of the index’s total market cap that have reported results show 7.7% annual earnings growth on 5% increase in revenues. The beat ratio for the bottom line was 75.5%, while that for top line was 65.1%, as of Oct 26.

Coming to the Zacks Utility sector, it is imperative to mention that stocks in this space are characterized by its defensive nature and domestic orientation. As of Oct 20, earnings for the utilities were expected to drop 4%. Notably, this week, we have witnessed a few S&P 500 utilities like CMS Energy Corporation (NYSE:CMS) and WEC Energy Group, Inc. (NYSE:WEC) reported their quarterly figures. Impressively, both of them surpassed earnings estimates, which make us reasonably hopeful that cumulative earnings performance of this sector might turn out to be positive. Read more details in our weekly Earnings Outlook.

Utilities have been benefiting from the rock-bottom interest rate environment. However, the Federal Reserve raised the rates twice this year — in March and June. This is likely to dent the stocks. In addition, the hurricanes also had an adverse impact on the utilities operating in Texas and Florida.

With the rising interest rates, the stable, regular dividend-payer utilities will face strong competition from bonds as these provide higher returns. This will make them viable investing options.

Let us take a sneak peek at few utility stocks that are scheduled to release third-quarter earnings on Oct 30.

Dominion Energy (NYSE:D) expects the addition of Questar operation to drive earnings. However, the bottom line is expected to be adversely impacted by lower earnings from Cove Point, higher PJM's electric capacity expenses and lower investment tax credits from solar investments.

For the third quarter, the Zacks Consensus Estimate for the company’s earnings is pegged at $1.03, reflecting 9.9% decline year over year.

On a brighter note, Dominion Energy continues to expand its solar generation facility through acquisitions and reap benefits of green energy generation. For the third quarter, our consensus estimate for total revenues is $3.33 billion, reflecting 6.3% increase year over year.

Our proven model does not conclusively show that Dominion Energy is likely to beat earnings this quarter as it does not possess the key components. 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Dominion Energy lacks this mix. The company currently has a Zacks Rank #3 and Earnings ESP of -0.46% (read more: What to Expect From Dominion Energy in Q3 Earnings?).

Edison International’s (NYSE:EIX) service territories witnessed warmer-than-normal temperatures during the third quarter. This, in turn, is likely to increase the energy consumption and boost the company’s top line. For the to-be-reported quarter, the Zacks Consensus Estimate for the company’s earnings reflects 3.46% growth year over year.

The company’s earnings are dependent on approvals from regulatory bodies and any adverse ruling may dent its performance. Our consensus estimate calls for an annual improvement of 4.6% in Edison International’s third-quarter earnings.

Our proven model does not conclusively show that Edison International is likely to beat earnings this quarter. The company currently carries a Zacks Rank #3 and Earnings ESP of -0.04%. You can see the complete list of today’s Zacks #1 Rank stocks here (read more: Edison International Q3 Earnings: What's in the Cards?).

Sempra Energy’s (NYSE:SRE) Mexican unit IEnova secured a liquid fuels project worth $155 million for construction of a receipt, storage and send-out liquid fuels marine terminal on the Mexican Gulf Coast. This deal will expand business operations for IEnova in Mexico by exploiting the booming energy market in the region.

We believe impacts from this project to get reflected in the company’s third-quarter sales. In line with this, the Zacks Consensus estimate for Sempra Energy’s third-quarter revenues is pegged at $2.78 billion, displaying a 9.5% annual upside.

Sempra Energy has received approval to reinstate natural gas injections at the Aliso Canyon storage field, wherein it has been incurring significant losses owing to a gas leak. However, management has expressed concern in relation to system reliability for resuming these gas injections this summer and in the coming winter given the limitations on targeted gas storage levels.

A disciplined cost-management system has been driving Sempra Energy’s earnings. In line with this, for the third quarter, our consensus estimate for the company’s earnings is pegged at $1.05, reflecting a year-over-year increase of 2.7%.

Our proven model shows that Sempra Energy is likely to beat Q3 earnings estimates. The company currently carries a Zacks Rank #3 and Earnings ESP of +0.72% (read more: Is Sempra Energy Poised for a Beat in Q3 Earnings?).

Stay tuned! Check later for our full write-up on earnings releases of these stocks.

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