PG&E (NYSE:PCG) will announce its third quarter earnings on Monday, October 29, 2012. Analysts have become increasingly bullish on the company in the last month, with consensus earnings per share estimate moving up from 86 cents a share to the current expectation of earnings of 88 cents a share.

Earnings play an important role in measuring the appropriate valuation for a stock. Investors should be cautious if the company's stock price is high but it consistently has low earnings. SEE: Surprising Earnings Results

What to Expect: The consensus estimate has dropped from 89 cents over the past three months. For the fiscal year, analysts are expecting earnings of $3.16 per share.

PG&E is expected to report revenue of $4.05 billion for the quarter, beating last year's figure of $3.86 billion by 4.9%. Revenue of $15.23 billion is expected for the fiscal year.

Company Performance: Revenue fell year-over-year in the second quarter to end a three-quarter growth streak. It fell 2.5% in the second quarter after rising 1.2%in the first quarter, 5.4% in the fourth quarter of the last fiscal year and 9.9% in the third quarter of the last fiscal year.

The company has seen steady earnings for the last eight quarters, but income has been dropping year-over-year by an average of 26.5% over the last four quarters.

PCG's P/E ratio of 23.2 is above the industry average of 13.08. This could mean that the market is expecting big things over the next few months or years. There are generally two price/earnings ratios calculated: the first, called the trailing Price/Earnings ratio, is calculated using the previous years actual earnings; the second, called forward Price/Earnings ratio, is calculated using the next year's estimated earnings. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: Profit With The Power Of Price-To-Earnings

Since July 30, 2012, the stock price has fallen 9.6% to $42.04 from $46.50. PG&E's stock price is on a downward streak. The share price has fallen $1.39 since October 17, 2012.

The Competition: PG&E distributes electricity and natural gas, generates electricity, and procures natural gas through Pacific Gas and Electric Company. Analysts generally consider PG&E a hold, with 11 of 15 analysts rating it as such. This rating has been unchanged for the past three months.

The company's closest competitor in the electric utilities industry is Consolidated Edison (ED). Analysts are more optimistic about PG&E than about Consolidated Edison. Only one out of 12 analysts rate the latter a buy compared to four of 15 for the former.

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Tickers in this Article: PCG

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