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PG&E (PCG) to Report Q2 Earnings: What's in the Offing?

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PG&E Corporation (PCG - Free Report) is scheduled to report second-quarter 2020 results on Jul 30, before market open.

In the last reported quarter, the company delivered a negative earnings surprise of 9.18%. However, the bottom line surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed in the remaining two. The four-quarter earnings surprise is 1.16%, on average.

Let’s see how things have shaped up prior to this announcement.

Factors to Consider

During a major part of second-quarter 2020, PG&E Corp’s service territories received extensive rainfall. Such wet weather conditions do not favor utility providers as electricity demand remains muted. Considering this, we remain skeptical about the company’s upcoming results. 

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The warm and dry conditions associated with Santa Ana winds brought critical fire weather to southern California during the latter part of the second quarter. This, in turn, must have pushed up expenses for California’s largest electric supplier, PG&E Corp, which generally incurs huge wildfire-related costs.

Moreover, since the second quarter, the midway parts of California witnessed extreme drought conditions causing water supply to dry up hastily. This must have pushed up costs for utility providers like PG&E Corp. that operate hydroelectric power plants.

Following the end of the April-June quarter, PG&E Corp. announced its emergence from bankruptcy, thereby successfully completing its restructuring process and implementing Plan of Reorganization. Therefore, all along the second quarter, the company had to incur significant costs related to Chapter 11.  

Such expenses are likely to have impacted its bottom-line performance in the soon-to-be-reported quarter. The Zacks Consensus Estimate for second-quarter 2020 earnings per share is pegged at 68 cents, implying a decline of 38.2% from the year-ago quarter reported figure.

Moreover, on Jun 16, the company raised $8.93 billion of debt, including approximately $3.5 billion of long-term debt to finance capital investments. This is expected to be reflected in its second-quarter balance sheet.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for PG&E Corp. this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But this is not the case here.

Earnings ESP: The company’s Earnings ESP is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: PG&E Corp. carries a Zacks Rank #5 (Strong Sell) currently.

Stocks to Consider

Here are some players from the Utilities sector that have the right combination of elements to post an earnings beat in the to-be-reported quarter.

CenterPoint Energy (CNP - Free Report) has an Earnings ESP of +7.87% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pinnacle West Capital (PNW - Free Report) has an Earnings ESP of +5.07% and a Zacks Rank #3.

Southwest Gas Corporation (SWX - Free Report) has an Earnings ESP of +41.77% and a Zacks Rank #2.

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