4 Utility Stocks Poised to Outperform in the Upcoming Earnings Cycle

The Zacks Utilities sector is projected to achieve a 0.7% earnings increase and 7.5% revenue growth for Q2 2025, primarily fueled by new rates, customer expansion, cost efficiencies, and significantly, surging demand from data centers, particularly those supporting AI. Broader tailwinds include infrastructure resilience, smart meter adoption, and industrial reshoring. MDU Resources (MDU), ONE Gas (OGS), Sempra Energy (SRE), and Spire (SR) are identified as key utilities poised to exceed earnings expectations this reporting cycle, based on strong analytical indicators.

Analysis

The Zacks Utilities sector is forecast to show modest bottom-line growth in Q2 2025, with earnings expected to rise 0.7% on the back of a robust 7.5% increase in revenues. This performance is underpinned by a combination of traditional drivers, such as new rate implementations and customer base expansion, and significant emerging catalysts, most notably the surging electricity demand from data centers supporting artificial intelligence and the reshoring of industrial manufacturing. Four companies—MDU Resources (MDU), ONE Gas (OGS), Sempra Energy (SRE), and Spire (SR)—are identified as having a high probability of surpassing earnings estimates, based on a positive Earnings ESP and favorable Zacks Rank. However, their underlying financial trajectories vary significantly. ONE Gas stands out with a projected 37.8% year-over-year earnings per share increase to $1.75, driven by new rates and infrastructure investment. In contrast, MDU Resources and Sempra Energy are expected to post earnings declines of 59.4% and 6.7% respectively, despite positive ESP signals, indicating that a potential earnings beat would be relative to lowered expectations. Spire is projected to narrow its quarterly loss by 35.7%, reflecting operational improvements in its core and Midstream segments.

Key Decisions for Investors

• Investors should recognize the evolving growth narrative in the utilities sector, where demand from data centers and AI is becoming a key differentiator, supplementing traditional rate-based growth.
• It is critical to analyze individual company fundamentals beyond the headline 'earnings beat' potential; for instance, contrast the strong projected year-over-year earnings growth at ONE Gas (+37.8%) with the significant projected declines at MDU Resources (-59.4%) and Sempra Energy (-6.7%).
• ONE Gas (OGS) warrants particular attention for growth-oriented investors, given its combination of a strong 'Buy' rating, positive Earnings ESP, and a substantial forecast for underlying earnings growth.
• For MDU and Sempra, a potential earnings beat should be viewed with caution, as it occurs against a backdrop of declining year-over-year profitability, necessitating a deeper investigation into the core drivers of this fundamental weakness before considering a long position.