These 2 Utilities Stocks Could Beat Earnings: Why They Should Be on Your Radar

The article highlights the Zacks Earnings ESP (Expected Surprise Prediction) as a robust tool for identifying stocks likely to report positive earnings surprises. This methodology, which compares the Most Accurate Estimate to the Zacks Consensus Estimate, has historically shown that a positive ESP combined with a Zacks Rank #3 (Hold) or better leads to positive earnings surprises 70% of the time, yielding average annual returns of 28.3% over a 10-year backtest. American Electric Power (AEP) and Sempra (SRE) are presented as current examples in the Utilities sector with positive ESPs of +10.45% and +1.22% respectively, signaling potential earnings beats for these companies.

Analysis

Two utility sector companies, American Electric Power (AEP) and Sempra (SRE), are flagged for potential positive earnings surprises based on the Zacks Earnings ESP (Expected Surprise Prediction) model. This quantitative screen identifies stocks with a positive ESP and a Zacks Rank of #3 (Hold) or better, a combination which has historically preceded a positive earnings surprise 70% of the time. American Electric Power exhibits a particularly strong signal with an ESP of +10.45%, stemming from its Most Accurate Estimate of $1.29 per share versus a consensus estimate of $1.17 ahead of its July 30, 2025 report. Sempra also qualifies with a positive, albeit much smaller, ESP of +1.22% from its Most Accurate Estimate of $0.83 versus a consensus of $0.82 for its August 5, 2025 earnings. While both stocks hold a neutral #3 (Hold) rank, suggesting expectations for in-line market performance, the significant divergence in recent analyst revisions for AEP indicates a stronger likelihood of an earnings beat compared to SRE.

Key Decisions for Investors

• Investors with an event-driven or short-term tactical focus could consider establishing a long position in American Electric Power (AEP) ahead of its late July earnings report to capitalize on the high +10.45% ESP signal.
• For Sempra (SRE), the positive but marginal +1.22% ESP suggests a lower conviction signal; therefore, any speculative position should be sized more cautiously relative to AEP.
• Recognize that both stocks carry a neutral 'Hold' rating, implying that any potential upside from an earnings surprise must be weighed against their broader expectation of performing in-line with the market, making this a catalyst-specific trade rather than a long-term fundamental buy signal.
• Monitor any changes to the Most Accurate Estimate for both AEP and SRE as their reporting dates approach, as shifts in this metric would directly alter the strength of the earnings surprise prediction.