Utilities Earnings Mixed In Q3: ETFs In Focus

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The utilities sector has come up with mostly decent results this earnings season. 96.4% of S&P companies in the sector have reported. About 63% beat on bottom line and 92.6% surpassed the top line estimates, per the earnings trends issued on Nov. 9, 2022.


Earnings in Focus

In early November, NextEra Energy Inc. (NEE - Free Report) reported third-quarter 2022 adjusted earnings of 85 cents per share, which beat the Zacks Consensus Estimate of 79 cents by 7.6%. The bottom line was also up 13.3% from the prior-year quarter. This year-over-year improvement was due to the solid performance of Florida Power & Light Company and NextEra Energy Resources.         

GAAP earnings for the third quarter were 86 cents compared with earnings of 23 cents in the year-ago period. For the third quarter, NextEra’s operating revenues were $6,719 million, which surpassed the Zacks Consensus Estimate of $6,353 million by 5.8%. The top line improved 53.8% year-over-year.

In early November, Duke Energy Corporation (DUK - Free Report) reported third-quarter 2022 adjusted earnings of $1.78 per share, which missed the Zacks Consensus Estimate of $1.83 by 2.7%. The bottom line also dropped 5.3% year-over-year.

This year-over-year decline is attributable to lower commercial renewable projects placed in service along with higher depreciation and amortization expenses, lower returns on investments, and higher interest expenses.

Total operating revenues came in at $7,968 million, which improved 14.6% from $6,951 million a year ago. The reported top line also surpassed the Zacks Consensus Estimate of $7,192.9 million by 10.8%. The regulated electric unit’s revenues were $7,374 million (up 13.5% year-over-year), representing 92.5% of total revenues for the quarter. Revenues from the regulated natural gas business totaled $397 million, up 50.9% year-over-year.

In early November, Dominion Energy Inc. (D - Free Report) reported third-quarter 2022 operating earnings of $1.11 per share, which surpassed the Zacks Consensus Estimate of $1.08 by 2.8%. Quarterly earnings were near the high end of the company’s guided range of 98 cents and $1.13 per share. Operating earnings were on par with the year-ago quarter’s results.

The GAAP earnings for the third quarter were 91 cents per share compared with 79 cents in the year-ago quarter. Dominion Energy’s total revenues were $4,386 million, which surpassed the Zacks Consensus Estimate of $3,912 million by 12.1%. Revenues improved 38.1% from $3,176 million in the year-ago quarter.


Utility ETFs in Focus

In the current scenario, let’s discuss ETFs that have relatively high exposure to the above-mentioned utility companies.


Utilities Select Sector SPDR Fund (XLU - Free Report)

This fund tracks the Utilities Select Sector Index. It comprises 29 holdings, with the above-mentioned companies carrying about 30% weight. Its AUM is $17.17 billion and its expense ratio is 0.10%. The fund has gained 3.1% over the past month (as of Nov. 9, 2022). It carries a Zacks ETF Rank (Buy), with a Medium-risk outlook.         


Vanguard Utilities ETF (VPU - Free Report)

This fund tracks the MSCI US Investable Market Utilities 25/50 Index, and it includes stocks of companies that distribute electricity, water, or gas that operate as independent power producers. It comprises about 60 holdings, with the above-mentioned companies constituting 26.5%. Its AUM is $6.09 billion and its expense ratio is 0.10%. It has increased 3.6% over the past month. It carries a Zacks ETF Rank (Hold), with a Medium-risk outlook.


iShares U.S. Utilities ETF (IDU - Free Report)

This fund tracks the Russell 1000 Utilities RIC 22.5/45 Capped Index, providing exposure to U.S. companies that supply electricity, gas, and water. It comprises 44 holdings, with the above-mentioned companies constituting 26%. Its AUM is $1.0 billion and its expense ratio is 0.39%. It has increased about 3% over the past month. The fund carries a Zacks ETF Rank (Buy), with a Medium-risk outlook.


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