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PG&E Corp. (PCG) to Post Q2 Earnings: What's in the Cards?

Zacks Equity Research
Updated

PG&E Corporation PCG is set to report second-quarter 2018 results on Jul 26, before the opening bell.

The company came up with a negative earnings surprise of 11.65%, in the last reported quarter. However, its bottom line surpassed the Zacks Consensus Estimate in two of the trailing four quarters with average beat of 1.92%.

Let’s see how things are shaping up at the company prior to this announcement.

Factors at Play

Warmer-than-normal summer was witnessed in PG&E Corp.’s service territory, during the second quarter, indicating at increased electricity demand. This in turn, is likely to boost the company’s quarterly revenues. In line with this, the Zacks Consensus Estimate for revenues is pegged at $4.35 billion, reflecting a 2.3% year-over-year increase.

Following the latest U.S. tax reform, the company expects its rate base to increase by $500 million in 2018. Management expects to generate 25 cents of earnings from this rate base growth in 2018, reflecting an annual improvement from that of 2017. Considering this, we may expect the rate base growth to boost the company’s bottom line in the second quarter as well. In line with this, the Zacks Consensus Estimate for PG&E’s second-quarter earnings of 96 cents per share reflects year-over-year growth of 11.6%.

However, in relation to the widespread wildfires that damaged major parts of Northern California last October, the company incurred $259 million costs for service restoration and repairs to its facilities in connection with these fires through Mar 31, 2018. Such expenses are recoverable through Catastrophic Event Memorandum Account CEMA, subject to California Public Utility Commission’s (CPUC) approval. If the company’s requests for cost recovery are not approved, the same is likely to weigh on its quarterly earnings growth.

Pacific Gas & Electric Co. Price and EPS Surprise

Pacific Gas & Electric Co. Price and EPS Surprise | Pacific Gas & Electric Co. Quote

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Earnings Whispers

Our proven model does not conclusively show that PG&E Corp. is likely to beat estimates this to-be-reported quarter. That is because a stock needs to have a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But this is not the case here as you will see below.

Earnings ESP: PG&E Corp. has an Earnings ESP of -2.18%, representing the percentage difference between the Most Accurate Estimate of 94 cents per share and the Zacks Consensus Estimate of 96 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: PG&E has a Zacks Rank #3, which increases the predictive power of ESP. However, the company needs to have a positive ESP to be confident about a likely earnings surprise. Therefore, this combination leaves surprise prediction inconclusive.

We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are a few stocks in the Utility – Electric Power space that you may want to consider as our model shows that these have the right combination of elements to beat on earnings in the upcoming releases.

Algonquin Power & Utilities Corp. AQN has an Earnings ESP of +15.38% and a Zacks Rank #1. It is expected to report second-quarter 2018 earnings on Aug 9.

Ameren Corporation AEE has an Earnings ESP of +1.69% and a Zacks Rank #2. The company is anticipated to report second-quarter 2018 earnings on Aug 3.

CMS Energy Corporation CMS has an Earnings ESP of +11.26% and a Zacks Rank of 2. It is expected to report second-quarter 2018 earnings on Jul 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Ameren Corporation (AEE) : Free Stock Analysis Report
 
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Algonquin Power & Utilities Corp. (AQN) : Free Stock Analysis Report
 
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