Median earnings for Fitch Ratings' sample of US utilities, power and gas companies grew by approximately 3% on a year-over-year basis, despite unfavorable weather comparisons due to an uncharacteristically strong winter in 2014. The first-quarter results confirm the positive trend displayed in 2014 and underscore a good start to 2015 for the sector.

The vast majority of companies affirmed their 2015 earnings guidance against a backdrop of relatively encouraging 1Q15 financial results and moderate optimism that the momentum can continue for the remainder of 2015. Weather normalization, constructive rate outcomes, cost control and relatively modest net sales growth continue to be embedded in 2015 expectations.

The benefit of improved local economies in several utility jurisdictions led to higher industrial sales for the quarter. The trend was particularly visible for utilities in the southern US where Southern Co., Entergy Corp. and Duke Energy Corp. continue to experience ramped-up business activity in their service territories, keeping a positive momentum on industrial sales in early 2015.

In general, utilities with operations in oil-dependent service areas reported no material impact from falling oil prices on industrial sales. American Electric Power Co. noted that its sales to the oil and gas extraction sector continue to grow at a steady pace while Xcel Energy Inc. and CenterPoint Energy reported very little effect from the low oil price environment on their Texas operations. Some companies (FirstEnergy and Westar) noted weakness in steel and certain chemical industries that have been hit from capex cuts in oil drilling.

Key credit metrics across the sector remain broadly in line with Fitch's expectations. Coverage ratios continue to be healthy, supported by utilities' refinancing activities and a persistently low interest rate environment. Competitive generation companies showed mixed results with FFO-based ratios moderately weaker and EBITDAR-based ratios stronger compared with 2014 year-end ratios.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

Off to a Good Start (1Q15 Earnings Calls Wrap-Up)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866577

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Fitch RatingsPhilippe BeardDirectorCorporates, Global Power+1 212 908 0242orKellie Geressy-NilsenSenior DirectorFitch Wire+1 212 908-9123Fitch Ratings33 Whitehall StreetNew York, NY 10004orMedia Relations:Alyssa Castelli, +1-212-908-0540alyssa.castelli@fitchratings.comElizabeth Fogerty, +1-212-908-0526elizabeth.fogerty@fitchratings.com