Wall Street expects most gas utilities to report higher first-quarter earnings than a year ago, though many analysts will be more focused on the future, listening for commentary on how the coronavirus pandemic and a steep economic downturn will impact the gas distribution business.

Several analysts believe gas utilities are relatively insulated from the crisis since sector revenues are largely based on long-term investment in safety and reliability programs. However, analysts have raised concerns in recent weeks about debt and equity issuances, sluggish gas demand and companies' ability to collect on bills and staff infrastructure projects.

Analysts expect six out of nine selected gas utilities to beat year-ago earnings when they report results for the first three months of 2020, according to an analysis by S&P Global Market Intelligence. Meanwhile, the Street forecasts half of the 14 multiutilities with comparable earnings will report higher earnings.

Heading into 2020, analysts expected utility stocks to struggle for inflows as investors flocked to equities with more exposure to the rising business cycle. But the trade has reversed since markets collapsed in February, with investors seeking shelter in safe-haven assets such as utility stocks.

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A selected index of nine gas utility stocks — Atmos Energy Corp., Chesapeake Utilities Corp., New Jersey Resources Corp., Northwest Natural Holding Co., ONE Gas Inc., South Jersey Industries Inc., Southwest Gas Holdings Inc., Spire Inc. and UGI Corp. — has largely outperformed the S&P 500 since early March.

Swiss investment bank UBS believes the sector will remain attractive to investors amid ongoing uncertainty, but analysts Aga Zmigrodka and Shneur Gershuni have identified a number of considerations that could drive relative performance within the space.

The analysts raised concerns that some gas utilities would remain locked into issuing equity to fund accelerated pipeline replacement programs, a move that threatens to dilute earnings because stock prices are depressed. They later said that the borrowing by gas utilities seeking to shore up liquidity meant the bank could no longer award the sector a valuation bonus for improved balance sheets. The analysis suggests executives will face questions about their capital structure.

Wall Street will also be looking for early indications on how energy demand is holding up among residential, commercial and industrial customers. Analysts widely expect a boost in residential gas and electric power consumption to offset a drop in commercial and industrial demand as many states have been under shelter-at-home orders for weeks.

The U.S. Energy Information Administration recently forecast residential gas demand would slump 5.8% this year compared to 2019 due to warmer-than-usual weather. Commercial demand, largely underpinned by heating in large buildings, is poised to fall 7.1% in 2020 on mild weather and economic weakness, the EIA said in its latest Short-Term Energy Outlook on April 7. The EIA sees industrial demand flat, compared with an earlier forecast for 6.5% growth, due to weaker-than-expected manufacturing activity.

Some multiutility executives have already said smart meters are giving them a real-time view into the shift to high-margin residential demand, so investors could get more clarity on household and industrial consumption on earnings conference calls. Analysts have also said alternative rate mechanisms will allow some utilities and regulators to account for revenue dislocations resulting from the downturn.

Even with many Americans sheltered at home, Morningstar equity analyst Charles Fishman expects the mild winter to weigh on earnings. Still, he said some utilities may have begun to experience an upswing in uncollectible accounts, noting winter heating bills came due just as weekly unemployment claims skyrocketed to record levels and utility commissions imposed bans on service terminations at the end of the quarter.

"I'm interested in what they say about recovery of bad debt," he said. "There was enough cold weather that you could have someone with a bill due in March for January and February that doesn't get paid and the utility is stuck with it."

Fishman said he will also listen for commentary on rising costs associated with the epidemic, as well as guidance on project impacts. Fishman did not expect many companies to experience supply chain disruptions or problems executing long-term pipeline replacement plans, but said he is nevertheless anxious to get an update from management teams.

"That's the big issue for me — what's going on with long-term investment?" the analyst said. "Are there going to be some projects that get delayed, which reduces investment, reduces capex, which will reduce rate base growth and revenue growth and stock price potentially?"