Electric Utility Stocks' Q2 Earnings On Jul 27: NEE, WEC, SO

Utilities are among the safest investment options due to the regulated nature of their business which gives their revenues a high level of certainty. Adding to the positives, a domestic orientation shields these companies from unfavorable foreign currency translation, which is a major cause of concern for many an industry.

The Q2 earnings season in the utility sector will kick start this week with five utility majors scheduled to report quarterly numbers. Notably, an analysis of the earnings estimates for this quarter shows only a modest improvement from the exceptionally weak levels of the last couple of quarters. However, the benchmark S&P 500 index is likely to witness a decline for the fifth quarter in a row, with growth in the negative territory for 9 of the 16 Zacks sectors.

So far, 126 S&P 500 members have released Q2 results, accounting for a total of 32.7% of the index’s market capitalization. Total earnings for these companies have declined 1.1% due to 2.6% lower revenues. However, an impressive 70.6% managed to beat earnings estimates, while 55.6% surpassed top-line expectations.

As per the latest Earnings Preview report the general outlook for the utility sector remains bullish driven by expectations of a 20.9% year-over-year surge in quarterly earnings, compared to the S&P 500’s anticipated 3.4% drop over the same period, including the results of the energy sector. Meanwhile, revenues in the sector will grow 2.4% compared to the S&P 500’s 0.5% dip.

With these in the backdrop, let’s take a look at some utility companies that are scheduled to release earnings this week.

NextEra Energy Inc. (NYSE:NEE) is scheduled to report second-quarter 2016 results on Jul 27, before the market opens. Last quarter, the company has reported a positive earnings surprise of 12.32%.Our proven model does not conclusively show that NextEra Energy 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.

NextEra Energy’s Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -3.87% as the Most Accurate estimate stands at $1.49, while the Zacks Consensus Estimate is pegged at $1.55. Though NextEra Energy’s Zacks Rank #3 increases the predictive power of ESP, the company’s negative ESP makes surprise prediction difficult.(Read more: NextEra Energy Q2 Earnings: Stock to Disappoint?)

WEC Energy Group Inc. (NYSE:WEC) will release second-quarter 2016 financial results before the market opens on Jul 27.The utility has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 53 cents. Though WEC Energy’s Zacks Rank #3 increases the predictive power of the ESP, a 0.00% ESP makes a beat uncertain this quarter. (Read more: WEC Energy Q2 Earnings: Stock to Pull a Surprise?)

Southern Company (NYSE:SO) is expected to beat expectations when it reports second-quarter 2016 results before the opening bell on Jul27. The utility has an Earnings ESP of 2.94% as the Most Accurate estimate stands at 70 cents, whereas the Zacks Consensus Estimate is pegged lower at 68 cents. Southern Company carries a Zacks Rank #3 (Hold), which when combined with a positive ESP, makes us reasonably confident of an earnings beat this quarter. (Read more: Can Southern Co. Keep the Earnings Streak Alive in Q2?)

Keep an eye on our full earnings articles to see how these stocks finally fared this season.