The Zacks Utilities sector’s third-quarter 2023 earnings are expected to have been driven by warmer weather conditions, new utility rates and usage of new technologies that assisted in reducing operating expenses.

Per the latest Earnings Preview, the Zacks Utilities sector’s third-quarter earnings are expected to increase 4.4%, while revenues are expected to decline 1.9% in the third quarter. The capital-intensive utility stocks were impacted by the ongoing rise in interest rates.

Factors That Likely Impacted Performances

Domestic-focused companies operating in the sector have been concentrating on cost management and the implementation of energy-efficiency programs. New rates and customer additions are creating fresh demand and assisting the utilities. Investments in strengthening the infrastructure are allowing utilities to reduce outages and provide efficient services 24x7 to customers, leading to stable earnings.

Utilities have been focused on improving productivity and their cost structures through investments in digital technologies, integrating key systems and analyzing data to make proper decisions to improve overall operations. Utilities continue to invest smart capital that helps reduce operating and maintenance expenses and fuel costs. This, in turn, helps customers save money on their utility bills.

Utilities have been adding more renewable and clean energy sources to their production portfolios and cutting down the use of coal and other polluting sources in their generation portfolios. Weather in the third quarter was warm, which adversely impacted use per customer during the period.

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

According to the Zacks model, a company needs the right combination of two key elements — 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.

NiSource Inc.’s (NI Quick QuoteNI - Free Report) third-quarter earnings are likely to have benefited from the new electric and gas rates and the capital investment programs. The company’s cost-saving initiatives and lower operation and maintenance expenses are expected to have boosted its margins. (Read more: NiSource to Report Q3 Earnings: What's in the Cards?)

Our proven model predicts a likely earnings beat for NiSource this time around. NI has an Earnings ESP of +18.52% and a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Entergy Corporation’s (ETR Quick QuoteETR - Free Report) third-quarter earnings are likely to have benefited from a warmer-than-normal weather pattern. This is likely to have resulted in higher electricity consumption for cooling purposes in the summer, thereby boosting ETR’s revenue growth in the to-be-reported quarter. Lower pension expenses, as well as favorable operation and maintenance expenses, owing to lower spending for nuclear and nonnuclear generation, are expected to have aided the company’s overall quarterly bottom-line performance. (Read More: Entergy to Report Q3 Earnings: What's in the Offing?)

Our proven model predicts a likely earnings beat for Entergy Corporation this time around. ETR has an Earnings ESP of +0.36% and a Zacks Rank #3 at present.

American Water Works Company’s (AWK Quick QuoteAWK - Free Report) third-quarter earnings are expected to have benefited from new water rates effective in different territories. It received approval for implementing new rates worth $340 million, effective Jan 1, 2023, which is likely to have had a positive impact on its third-quarter earnings. However, the increase in interest rates is a concern as the company plans to invest multi-billion dollars to strengthen and expand its infrastructure. (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 Works this time around. AWK has an Earnings ESP of 0.00% and a Zacks Rank #3 at present.

DTE Energy Company’s (DTE Quick QuoteDTE - Free Report) third-quarter earnings are likely to have been impacted by unfavorable weather in its service territories. DTE is likely to have witnessed lower residential sales from the 2022 level with the return of people to work. However, higher earnings from its renewable plants, along with DTE’s cost reduction efforts, are expected to have boosted its overall bottom-line performance. (Read more: What's in the Cards for DTE Energy in Q3 Earnings?)

Our proven model does not conclusively predict an earnings beat for DTE Energy this time. DTE has an Earnings ESP of -4.58% and a Zacks Rank #3 at present.

Edison International’s (EIX Quick QuoteEIX - Free Report) third-quarter earnings are likely to have benefited from the approval of a new rate case. Mixed weather patterns in its service territories are also likely to have had a moderate impact on its overall revenues. A few wildfires impacted the company’s service territories this summer, which are expected to have raised its operating expenses for restoration work. This, in turn, is likely to have affected its quarterly earnings. (Read more: Edison International to Post Q3 Earnings: What's in Store?)

Our proven model does not conclusively predict an earnings beat for Edison International this time around. EIX has an Earnings ESP of -2.18% and a Zacks Rank #3 at present.

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