Why Is PG&E (PCG) Down 45% Since Last Earnings Report?

A month has gone by since the last earnings report for PG&E (PCG). Shares have lost about 45% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is PG&E due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

PG&E Corporation Q2 Earnings Beat, Revenues Down Y/Y

PG&E Corporation reported adjusted operating earnings per share of $1.10 in second-quarter 2019, which surpassed the Zacks Consensus Estimate of 97 cents by 13.4%. The bottom line, however, declined 5.2% from the year-ago quarter’s figure.

Including one-time items, the company incurred a GAAP loss of $4.83 per share compared with a loss of $1.91 in the prior-year quarter.

Revenue Update

PG&E Corp’s total revenues of $3,943 million missed the Zacks Consensus Estimate of $4,299 million by 8.3%. The top line also declined 6.9% from the year-ago quarter.

While electric revenues decreased 11% from the prior-year quarter’s figure, natural gas revenues improved 8.1% year over year.

Operational Highlights

Operating expenses in the reported quarter totaled $7,583 million, which surged 33% from $5,699 million in second-quarter 2018. The increase was due to higher cost of natural gas, elevated operating and maintenance expenses, higher wildfire-related claims, and escalated depreciation, amortization and decommissioning expenses.

The company incurred operating losses of $3,638 million compared with operating losses of $1,465 million in the previous year’s second quarter.

Interest expenses in second-quarter 2019 summed $60 million compared with $222 million in the year-ago period.

Guidance

PG&E Corp has not provided guidance for 2019 GAAP earnings and adjusted earnings from operations, due to the continuing uncertainty related to the 2018 Camp Fire, the 2017 Northern California wildfires, the Chapter 11 proceedings, and legislative and regulatory reforms.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

Currently, PG&E has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision indicates a downward shift. Notably, PG&E has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.