Dominion Energy (D) first-quarter earnings expected to decline

Wall Street is expecting a year-over-year earnings decline on higher revenue when Dominion Energy (D) reports results for the quarter ended March 2023. While this widely-known consensus forecast is important for assessing the company’s earnings situation, a strong factor that could affect its stock price in the near term is how well actual results compare to those estimates.

The earnings report, due on May 5, 2023, could help the stock climb higher if those key numbers beat expectations. On the other hand, if they miss, the stock could fall.

While the sustainability of the immediate price change and future earnings expectations will depend primarily on management’s discussion of business conditions during the earnings conference call, it is worth assessing the likelihood of a positive earnings surprise.

Zacks Consensus Estimates

The energy company is expected to post quarterly earnings of $1.01 per share in its upcoming report, representing a year-over-year change of -14.4%.

Revenue is expected to be $4.47 billion, up 4.5% from the prior-year quarter.

Estimate the trend of change

The consensus EPS estimate for the quarter has been revised up 0.3% over the past 30 days to current levels. That essentially reflects how the analysts covering the data collectively reassessed their initial estimates during that period.

Investors should note that the aggregate change does not necessarily reflect the direction of each lead analyst’s estimate revisions.

Whispers about earnings

Estimate revisions prior to a company’s earnings release provide an indication of business conditions during the earnings release period. This insight is the basis of our proprietary surprise forecasting model, the Zacks Earnings ESP (Expected Surprise Prediction).

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a newer version of the Zacks Consensus EPS estimate. The idea is that analysts revising their estimates just before an earnings release have the latest information, which could potentially be more accurate than what they and other consensus participants had previously forecast.

Thus, a positive or negative ESP reading theoretically indicates the likely deviation of actual earnings from consensus estimates. However, the predictive power of the model is only significant for positive ESP readings.

A positive Earnings ESP is a strong predictor of an earnings beat, especially when paired with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks in this combination deliver a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of its Earnings ESP.

It’s important to remember that a negative Earnings ESP reading does not indicate an earnings miss. Our research shows that it’s difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank 4 (Sell) or 5 (Strong Sell).

How do the numbers stack up for Dominion Energy?

In the case of Dominion Energy, the Most Accurate Estimate is the same as the Zacks Consensus Estimate, suggesting there are no recent analyst views that differ from those considered in deriving the consensus estimate. This leads to an Earnings ESP of 0%.

On the other hand, the stock currently carries a Zacks Rank #3.

So this combination makes it difficult to confidently predict that Dominion Energy will beat the consensus EPS estimate.

Does the history of surprising results hold any clue?

When calculating a company’s future earnings estimates, analysts often wonder how well it was able to match previous estimates. So it’s worth looking at the company’s surprise history to assess its impact on the upcoming number.

For the last reported quarter, it was expected that Dominion Energy would post earnings of $1.03 per share when it actually produced $1.06, delivering a surprise of +2.91%.

The company has beaten consensus EPS estimates twice over the last four quarters.

Bottom line

Beating or missing earnings may not be the only basis for a stock rising or falling. Many stocks lose ground despite beating gains due to other factors that disappoint investors. Similarly, unforeseen catalysts help many stocks gain despite missing earnings.

That said, betting on stocks to beat earnings expectations increases your chances of success. Therefore, it is worth checking a company’s Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure you use our Earnings ESP Filter to discover the best stocks to buy or sell before they go live.

Dominion Energy doesn’t seem like a compelling earnings beat candidate. However, investors should also pay attention to other factors if they want to bet on or stay away from these stocks ahead of an earnings release.

Expected results of an industry player

Another soon-to-be Zacks Utility Electric Power Industry stock, PG&E (PCG), is expected to post earnings of $0.29 per share for the quarter ended March 2023. These estimates indicate a year-over-year change of -3.3%. Revenue for the quarter is expected to be $6.21 billion, up 7.1% from the same quarter last year.

The consensus EPS estimate for PG&E has been revised 3.1% down to the current level over the last 30 days. However, the higher value of the most accurate estimate gave an earnings ESP of 6.90%.

Combined with the Zacks Rank #4 (Sell), this Earnings ESP makes it difficult to clearly predict that PG&E will beat consensus EPS estimates. The company has topped consensus EPS estimates twice over the last four quarters.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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