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Gas Utility Stocks Reporting Earnings on May 3: GAS, OKE

The first wave of utility earnings releases got over last week and we are gearing up for peak earnings sessions early this week. By the end of this week nearly 88% of the index members will have reported earnings results.

From the earnings trends so far in the first quarter, it is quite evident that the utility sector, which occupies 3.1% of the entire market cap, is set to outpace the performance of the S&P500 members. Utility earnings are estimated to improve 6.0% in the first quarter, whereas the S&P 500 average earnings are expected to be down 8.0%.

Among the 16 sectors in our coverage universe, the energy sector is expected to be the worst performer. Earnings from the energy sector are expected to be down 114.5% year over year on a 31.8% drop in revenues. Overall, earnings are expected to be negative for another 8 sectors excluding energy.

However, we do have good news for the remaining 7 sectors with the largest earnings growth year over year expected to come from the auto sector with 31.4%, followed by construction with 14.9% and utilities. For further details on earnings release kindly consult our Earnings Trend report.

The majority of utility earnings in the first quarter were to some extent affected by warmer-than-expected winter temperatures. However, the possibility of warmer weather going forward lifted prices of natural gas by 12.5% to $2.14 per million Btu (MMBtu)  last week.

Amid this positive expectation, let’s turn our focus on a couple of gas utilities which are scheduled to report earnings early this week.

AGL Resources Inc. GAS, a Zacks Rank #3 (Hold) stock, will release first-quarter 2016 financial results on May 3, 2016. In the prior quarter, this natural gas utility reported a negative earnings surprise of 7.69%. AGL Resources has a relatively low risk earnings stream and enjoys a near monopoly status in its region of operations. However, a milder-than-normal winter can adversely impact the company’s first-quarter 2016 cash flows read more: Can AGL Resources Pull a Surprise in Q1 Earnings?).


The above chart indicates that AGL Resources delivered a positive earnings surprise in only one out of the last four quarters. The average miss is 0.03%.

ONEOK Inc. OKE, a Zacks Rank #3 stock, is scheduled to report first-quarter 2016 results on May 3, after the closing bell. ONEOK continues to work on its new projects, located mainly in the Williston Basin, Permian Basin and other mineral-rich areas, which could give a boost to its long-term fee-based earnings. However, a sharp decline in commodity prices has slowed down drilling plans of ONEOK’s producer customers. As a result, demand for midstream services may not improve as much as expected (read more: ONEOK Q1 Earnings: What's in Store for the Stock?).


The above chart indicates that ONEOK Inc. delivered a positive earnings surprise in only one out of the last four quarters. The average negative earnings surprise was 5.86%.

Bottom Line

With the major part of S&P 500 earnings releases getting over by the end of this week, a focus on these gas utility operators is worthwhile.

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

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ONEOK INC (OKE): Free Stock Analysis Report
 
AGL RESOURCES (GAS): Free Stock Analysis Report
 
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