Utilities remain one of few pockets of the stock market to hold up in a tumultuous 2022. While the S&P 1500 Index has shed 5% this year, the S&P 1500 utilities sector has slumped 3% — fourth-best among the index’s 11 sectors, observes Rich Moroney, editor of Dow Theory Forecast.
With earnings season for the March quarter now in full stride, utilities look to build on their momentum. It’s still early, considering that just 26 utilities (51% of the sector) have announced results. But initial results have been mostly encouraging.
So far, utilities are averaging 2% year-to-year growth for earnings per share and 11% for revenue. Utilities have averaged 3% quarterly profit growth and 2% sales growth since 1994.
Roughly 65% of utilities topped the consensus for earnings per share and 77% for revenue. The broad S&P 1500 has seen 79% of stocks exceed the consensus for earnings and 76% for revenue. In the following paragraphs, we briefly review quarterly results for three members of our Top 15 Utilities portfolio.
For the March quarter, American Electric Power (AEP) grew operating earnings 6% per share to $1.22, squeezing past the consensus by $0.02. American Electric reaffirmed its 2022 guidance, which calls for per-share profits of $4.87 to $5.07, suggesting 2% to 7% growth and straddling the consensus of $4.99.
Management targets a long-term growth rate of 6% to 7%. The sale of American Electric’s Kentucky operations should close by the end of June; the $2.85 billion deal was announced in October.
Entergy (ETR) saw adjusted earnings per share fell 10% to $1.32 for the March quarter, missing the consensus by $0.05. The results included an $0.08-per-share benefit from favorable weather conditions. Despite the disappointing quarter, Entergy reaffirmed its full-year guidance, with per-share profits projected to climb 2% to 7%; the consensus calls for 5% growth.
Portland General (POR) saw March-quarter earnings per share fall 37% to $0.67, missing the consensus by $0.20. The company cut its 2022 profit outlook to a midpoint of $2.575 from $2.825, implying a 5% decline. Management blamed its lower guidance on a ruling by Oregon’s utility regulator to reduce deferrals for wildfire restoration and the coronavirus pandemic.