Utility Stocks' Q2 Earnings On Aug 2: ETR,NI, PNW, WR

With earnings releases coming in thick and fast, nearly 87% members of the S&P 500 index are expected to report financial numbers by the end of this week. The utility sector, known for its inherent stability, is expected to be in focus this week, with many companies operating in the space scheduled to report quarterly results.

Note that a domestic orientation makes utilities immune to the impact of a strengthening dollar. However, the performance of these companies depends on weather patterns to a large extent. Above-average temperatures in the second quarter of 2016, thus aided the performance of the majority of utilities operating in the U.S. The steady drop in unemployment rates should further boost results of the Utility sector.

So far, 317 S&P 500 members have released Q2 results, accounting for 73.5% of the index’s total market capitalization. Total earnings for these companies have declined 3.3% due to 0.9% lower revenues. In spite of the bleak year-over-year comparisons, an impressive 72.9% managed to beat on earnings, while 53.6% surpassed top-line expectations.

As per the latest Earnings Preview report, the general outlook for the utility sector remains bullish on the back of the projections of a 20.4% 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. On the other hand, revenues at the utility sector will grow 5.2%, compared to the S&P 500’s 0.4% dip.

Encouraged by a bullish outlook and positive fundamentals, particularly the low-rate scenario, let’s take a look at some utilities that are scheduled to report earnings on Aug 2:

Entergy Corporation (NYSE:ETR) engages principally in domestic utility operations, power marketing and trading, global power development, and domestic non-utility nuclear operations. The company reported a positive earnings surprise of 15.38% in the previous quarter. Our proven model shows that Entergy is likely to beat earnings this season because it has the right combination of two key ingredients – a positive Earnings ESP (the difference between the Most Accurate estimate and the Zacks Consensus Estimate) and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold).

Entergy has an Earnings ESP +6.73%. This is because the Most Accurate estimate stands at $1.11, while the Zacks Consensus Estimate is pegged slightly lower at $1.04.Entergy’s Zacks Rank #3, when combined with a positive ESP, makes us reasonably confident of an earnings beat this quarter. (Read more: Entergy Q2 Earnings: Will the Stock Beat Estimates?)

NiSource Inc. (NYSE:NI) is one of the largest fully-regulated utility companies in the United States. The company has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 6 cents. Though NiSource’s Energy’s Zacks Rank #3 increases the predictive power of the ESP, a 0.00% ESP makes a beat uncertain this quarter. (Read more: NiSource Q2 Earnings: Can the Stock Pull a Surprise?)

Pinnacle West Capital Corporation (NYSE:PNW) is engaged, through its subsidiaries, in the generation, transmission, and distribution of electricity and selling energy, products and services. The utility has an Earnings ESP of -2.56% as the Most Accurate estimate stands at $1.14, while the Zacks Consensus Estimate is pegged higher at $1.17. Pinnacle West Capital carries a Zacks Rank #4 (Sell).As it is, we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions. (Read more: Pinnacle West Q2 Earnings: Stock to Disappoint?)

Westar Energy, Inc. (NYSE:WR) is Kansas' largest electric utility. The utility has an Earnings ESP of -3.92% as the Most Accurate estimate stands at 49 cents while the Zacks Consensus Estimate is pegged higher at 51 cents. Though Westar Energy’s Zacks Rank #3 increases the predictive power of the ESP, a negative ESP makes a beat uncertain this quarter.

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