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What's in Store for Xcel Energy (XEL) This Earnings Season?

Xcel Energy Inc. XEL is set to report second-quarter 2017 results before the market opens on July 27. Last quarter, this public utility company delivered a negative earnings surprise of 6%.

Let’s see how things are shaping up for this announcement.

Factors at Play

The sign of economic improvement is prominent across Xcel Energy’s service territories, especially in Minnesota, compared with the nation as a whole. The consolidated unemployment rate in the company’s service territory was 3.2% in Dec, 2016, lower than the nation’s average of 4.7%.

The optimism in the market continues to drive the company’s sales and is likely to boost top line in the second quarter.

Additionally, the company has seen a consistent rise in the number of customers over the last few quarters. We expect this trend to continue in second quarter as well boosting its earnings.

However, rising debt level remains a matter of concern for the company. Xcel Energy’s debt/capital ratio stands at 55.3% compared with the industry’s average of 49.7% and the S&P 500’s level of 41.9%. Moreover, the company’s current ratio stands at 0.71, so the rising interest rates do not bode well for Xcel Energy. This is because the resulting increase in cost of capital will escalate cost of operations, thereby denting its margins.

Xcel Energy Inc. Price and EPS Surprise

Xcel Energy Inc. Price and EPS Surprise | Xcel Energy Inc. Quote

Earnings Whispers

Our proven model does not conclusively show that Xcel Energy is likely to beat earnings 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) to be able to beat consensus estimates. But that is not the case here, as you will see below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zacks ESP: The Company’s Earnings ESP is 0.00% because the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 42 cents.

Zacks Rank: Though Xcel Energy’s Zacks Rank #3 increases the predictive power of the ESP, but the 0.00% ESP makes it unlikely that this will see fruition this season.

Note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are a few stocks in the Utility sector that you may consider, as they have the right combination of elements to post an earnings beat this quarter.

Pattern Energy Group Inc. PEGI has an Earnings ESP of +7.69% and carries a Zacks Rank #2. It is slated to report second-quarter 2017 earnings on Aug 4.

The AES Corporation AES has an Earnings ESP of +20.00% and holds a Zacks Rank #2. It is slated to report second-quarter 2017 earnings on Aug 8.

NRG Energy, Inc. NRG has an Earnings ESP of +51.61% and carries a Zacks Rank #2. It is slated to report second-quarter 2017 earnings on Aug 3.

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Xcel Energy Inc. (XEL): Free Stock Analysis Report
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Pattern Energy Group Inc. (PEGI): Free Stock Analysis Report
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