Outperforming the Street: Predicting Utility Earnings with Geospatial Data
By modeling the relationship between localized weather and electricity demand for Allete Inc., our forecasts proved to be significantly more accurate than Wall Street analyst consensus, achieving a Mean Absolute Percentage Error (MAPE) of just 3.42% vs. the consensus of 4.50%.
The Challenge: Earnings Volatility
Utility company revenue is heavily influenced by weather, making it prone to earnings "surprises". Analyst estimates often fail to capture this localized volatility, creating information gaps and investment risk for portfolio managers.
The ilika Solution: A Weather-Driven Edge
We leverage our comprehensive historical weather dataset to model the primary driver of a utility's sales: heating and cooling demand. This provides a fundamental, data-driven signal that is more responsive and accurate than traditional estimates.
Our Analytical Edge: A 3-Step Process
1. Ingest Weather Data
We use our hyperlocal historical weather data for Minneapolis, MN, the proxy for Allete's primary service area.
2. Model Correlation
We build a regression model linking historical temperature variations to Allete's reported residential electric sales.
3. Forecast Performance
We apply the model to recent weather data to generate a highly accurate, forward-looking forecast of quarterly sales.
The Result: A Clear Predictive Advantage
Our approach consistently delivered a more precise forecast than analyst consensus, providing a reliable leading indicator for Allete's financial performance.
| Quarter | Reported (GWh) | ilika Forecast | ilika Error | Analyst Error | Outperforms? |
|---|---|---|---|---|---|
| Q1 2020 | 321,000 | 336,315 | 4.77% | 9.83% | Y |
| Q2 2020 | 246,000 | 246,335 | 0.14% | 3.96% | Y |
| Q3 2020 | 268,000 | 257,801 | 3.81% | 5.95% | Y |
| Q4 2020 | 299,000 | 300,330 | 0.44% | 2.61% | Y |
| Q1 2021 | 331,000 | 339,854 | 2.67% | 1.09% | N |
| Q2 2021 | 247,000 | 251,914 | 1.99% | 1.56% | N |
| Q3 2021 | 268,000 | 257,604 | 3.88% | 1.96% | N |
| Q4 2021 | 289,000 | 295,846 | 2.37% | 3.34% | Y |
| Q1 2022 | 355,000 | 364,552 | 2.69% | 5.15% | Y |
| Q2 2022 | 245,000 | 254,536 | 3.89% | 2.75% | N |
| Q3 2022 | 251,000 | 256,177 | 2.06% | 8.18% | Y |
| Q4 2022 | 297,000 | 313,008 | 5.39% | 0.75% | N |
| Q1 2023 | 321,000 | 354,295 | 10.37% | 11.35% | Y |
Your Strategic Advantage
Generate Alpha vs. Consensus
Use our data as a leading indicator to anticipate earnings surprises and position your portfolio before the rest of the market reacts.
Gain a Coverage Edge
Our model can be applied to any utility company, including those with little or no analyst coverage, uncovering hidden opportunities.
Enable Near-Term Forecasting
Leverage ilika's near-term weather forecasts (up to six weeks) to predict intra-quarter demand shifts with unparalleled accuracy.
Unlock Your Informational Edge
See how ilika Geospatial can provide a custom intelligence solution for your specific investment strategy.
REQUEST A DEMOexperts@ilikallc.com // www.ilikallc.com