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Utilities Q3 Earnings Due on Oct 31: AWK, OTTR, PEG & More

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The Zacks Utilities sector is expected to have benefited from a revival of demand in the commercial and industrial groups of customers. An improvement in economic conditions after the pandemic has been generating fresh demand for utility services.

Domestic-focused companies operating in the sector are focused on cost management and implementation of energy-efficiency programs. New rates and customer additions are creating fresh demand as well as assisting the utilities. Investment in strengthening the infrastructure is allowing the utilities to provide services even during extreme conditions, leading to stable earnings. Domestic-focused operations also insulate utilities from the adverse impact of currency fluctuation.

A clear transition is evident in the Utilities space, with companies operating in this space gradually moving toward clean sources of fuel to produce electricity and lower emission. The stringent regulation of emissions, the high cost of conventional fuel and government incentives on the usage of clean fuel are also urging the utilities to focus more on clean energy sources. Many utilities have already pledged to provide 100% electricity from clean sources in the next few decades.

Utilities need massive funds to upgrade, maintain and expand their infrastructure and operations, and are capital-intensive in nature. The performance of the utilities is likely to have been adversely impacted by the increase in interest rates from near-zero levels.

The increase in borrowing costs and the possibility of more interest rate hikes this year may have further pushed up capital servicing expenses and adversely impacted earnings.

Per the updated outlook of National Oceanic and Atmospheric Administration, the July-September 2022 average contiguous U.S. temperature was 73.0°F, 2.8°F above average. The above-average temperature during the summer months is likely to have spurred demand for water and electricity for cooling purposes, benefiting the utilities.

Per the latest Earnings Trends report, the utility sector’s third-quarter earnings are expected to decline 9.3%, while revenues are estimated to improve 3%.

According to the Zacks model, a company needs the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

American Water Works’ (AWK - Free Report) third-quarter earnings are likely to have benefited from efficient cost management and new water rates effective in different territories. Expansion in customer volume due to acquisitions and organic means is likely to have increased the demand for water and wastewater services as well as boosted earnings in the third quarter. ( Read more: American Water to Post Q3 Earnings: What's in Store?)

Our proven model does not conclusively predict an earnings beat for American Water this time around. AWK has an Earnings ESP of 0.00% and a Zacks Rank of 3.

Otter Tail Corporation’s ( (OTTR - Free Report) third-quarter performance is likely to have benefited from an improvement in retail sales volume to commercial and industrial customers. Improvement in demand for PVC pipes and prices also contributed to third-quarter earnings. (Read more: What's in the Offing for Otter Tail in Q3 Earnings?)

Our proven model does not conclusively predict an earnings beat for Otter Tail this time around. OTTR has an Earnings ESP of 0.00% and a Zacks Rank of 3.

Otter Tail Corporation Price and EPS Surprise

Otter Tail Corporation Price and EPS Surprise

Otter Tail Corporation price-eps-surprise | Otter Tail Corporation Quote

Public Service Enterprise Group Incorporated (PEG - Free Report) third-quarter performance is likely to have benefited from warmer-than-normal temperatures, which boosted demand for utility services. However, supply-chain and inflationary pressures may have dampened PEG’s bottom line in the soon-to-be-reported quarter. (Read more: PSEG Set to Report Q3 Earnings: What’s in the Cards?)

Our proven model does not conclusively predict an earnings beat for Public Service Enterprise this time around. PEG has an Earnings ESP of 0.00% and a Zacks Rank of 3.

ONE Gas (OGS - Free Report) third-quarter performance is likely to have benefited from customer growth and the ongoing improvement in economic conditions in its service territories that have boosted demand for utility services. The likely increase in operating expenses is expected to have offset some of the positives in the soon-to-be reported quarter.

Our proven model does not conclusively predict an earnings beat for ONE Gas this time around. OGS has an Earnings ESP of 0.00% and a Zacks Rank of 3.

ONE Gas, Inc. Price and EPS Surprise

ONE Gas, Inc. Price and EPS Surprise

ONE Gas, Inc. price-eps-surprise | ONE Gas, Inc. Quote

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