What to Expect From These 2 Utility Stocks This Season?

PPL Corporation PPL and Vistra Corp. VST are set to report second-quarter earnings on Aug.7. These announcements will provide insight into how things have shaped up for utilities this earnings season.

Factors to Consider

Utilities continue to make disciplined capital investments aimed at lowering operating, fuel and maintenance costs. These savings can ultimately help reduce the burden of utility expenses on customers. At the same time, investments in digital technologies, critical system interconnections and data-driven decision-making have enabled utilities to improve operational efficiency and overall performance. Prevailing interest rates might also have supported capital-intensive utilities by allowing them to finance long-term projects at relatively lower borrowing costs.

Utilities continue to benefit from several favorable factors, including the implementation of new electric and natural gas tariffs, customer growth, disciplined cost management and the execution of energy-efficiency initiatives. 

Most utilities have committed to delivering 100% clean energy and achieving net-zero emissions over the coming decades. To meet these goals, utilities are steadily reducing reliance on coal and other high-emission generation sources while expanding their portfolios of cleaner, renewable energy resources, including wind, solar and hydropower. Meanwhile, utilities are also expanding battery energy storage capacity to facilitate the greater integration of renewable energy into the power grid.

As demand for reliable, clean energy continues to rise, particularly from AI-driven data centers, utilities are increasingly relying on nuclear power generation to meet customers' needs. In addition, several utilities are advancing the development of small modular reactors (SMRs) as a long-term solution to support the growing demand for carbon-free electricity.

What Our Model Predicts

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 beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Vistra’s second-quarter results are likely to benefit from rising clean electricity demand, fueled by the rapid expansion of U.S. data centers, industrial reshoring and Permian Basin electrification. With a diversified generation portfolio and a high-quality nuclear fleet, the second-quarter earnings are likely to have benefited from accelerating load growth across key markets such as PJM and ERCOT. ( Read more: Vistra to Report Q2 Earnings: What to Expect From the Stock?)

Our proven model does not predict an earnings beat for Vistra this time around. VST has an Earnings ESP of 0.00% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PPL’s second-quarter earnings are expected to have benefited from ongoing economic development across its service territories, which is likely to have driven higher electricity demand. Strong demand from data centers in Pennsylvania, along with rising private-sector investment in Kentucky, is expected to have supported revenue and earnings growth.

Additionally, new retail electric rates that took effect on Jan. 1 are likely to provide a further boost to second-quarter results. ( Read more: PPL Gears Up to Report Q2 Earnings: Buy, Sell or Hold the Stock?)

Our proven model does not predict an earnings beat for PPL this time around. PPL has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell) at present. 

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This article originally published on Zacks Investment Research (zacks.com).

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