4 Utility Stocks Poised to Outperform in the Upcoming Earnings Cycle

The Zacks Utilities sector is forecast to report a 0.7% increase in Q2 2025 earnings on 7.5% higher revenues, primarily driven by new rate implementations, customer growth, cost efficiencies, and notably, surging demand from data centers, particularly those supporting artificial intelligence. This robust outlook, further bolstered by infrastructure investments and renewable energy initiatives, positions the sector favorably. Four specific companies—MDU Resources, ONE Gas, Sempra Energy, and Spire—are identified as potential outperformers this earnings season, based on their positive Earnings ESP and strong Zacks Ranks.

Analysis

The Zacks Utilities sector is positioned for modest bottom-line growth in the second quarter of 2025, with earnings projected to increase 0.7% on the back of a robust 7.5% rise in revenues. This outlook is supported by a confluence of traditional and emerging catalysts, including new rate implementations, ongoing customer growth, and cost-containment initiatives. Critically, a significant new tailwind is the surging electricity demand from data centers, particularly those supporting artificial intelligence, alongside renewed demand from the reshoring of industrial activity. The analysis identifies four specific utilities poised to exceed earnings expectations based on a combination of a positive Earnings ESP and a favorable Zacks Rank. However, the underlying financial trajectories of these firms vary significantly. ONE Gas (OGS) exhibits strong fundamental momentum, with consensus estimates pointing to a 37.8% year-over-year earnings increase, while Spire (SR) is expected to narrow its seasonal loss by 35.7%. In contrast, MDU Resources (MDU) and Sempra Energy (SRE) are flagged as potential outperformers despite facing projected year-over-year earnings declines of 59.4% and 6.7%, respectively, indicating that the 'beat' expectation is relative to lowered analyst consensus rather than absolute growth.

Key Decisions for Investors

• Investors should differentiate between the highlighted utilities, recognizing that the 'outperform' thesis for MDU and Sempra is based on beating lowered expectations, whereas ONE Gas is forecast for significant absolute year-over-year earnings growth.
• Consider the upcoming earnings season as a tactical opportunity, as the selection methodology relies heavily on the Zacks Earnings ESP, a metric designed to predict near-term earnings surprises.
• Monitor management commentary on the magnitude and forward-looking impact of data center demand, as this is presented as a primary secular growth driver for the entire sector.
• Evaluate MDU Resources as a transformed, pure-play regulated utility following its recent spinoff, focusing on its future performance based on customer growth and energy delivery rather than its historical consolidated results.