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Gauging Crucial Quantitative Indicators for Utility Stocks

PART:
1 2 3
Part 2
Gauging Crucial Quantitative Indicators for Utility Stocks PART 2 OF 3

DUK, AWK, FE: Why These Utility Stocks Are in Focus

Utility stocks with high implied volatilities

NRG Energy (NRG) has risen 23.1% in the past year, the most among high-volatility utility stocks. It also has the highest implied volatility of all the utility companies that make up the Utilities Select Sector SPDR ETF (XLU), as we saw in the previous part of this series.

DUK, AWK, FE: Why These Utility Stocks Are in Focus

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But, in the past five days, NRG Energy has fallen 7.2% while XLU has risen 0.1%. The S&P 500 Index (SPY)(SPX-INDEX) rose 0.8%. The utility sector accounts for ~3.2% of the S&P 500 Index.

The above chart shows the trailing one-year and five-day returns of the stocks we identified in the previous part as having high and low implied volatilities. High implied volatility stocks saw sharper movements compared to low implied volatility stocks. High-implied-volatility stocks also tended to fall.

Among high-implied volatility stocks, Scana (SCG) has risen the most in the last five days while NRG Energy (NRG) has fallen the most.

After the announcement of the date for its 1Q17 earnings, NRG stock closed lower in five trading sessions out of six. We discussed this performance in Part 1 of this series.

However, NRG Energy rose the most in the past year among high-volatility utility stocks. In the last four quarters, NRG’s revenue has fallen 10.8% while its adjusted operating income has fallen 81.5%. NRG Energy’s operating profit margin is 9.8%.

FE was the only loser among high-volatility utility stocks in the trailing year. On April 20, 2017, it announced that it will report its 1Q17 earnings on April 27, 2017. Wall Street expects FE to report earnings of $0.75 per share in 1Q17.

In the last four quarters, FE’s revenue has risen 3.1%, while its adjusted operating profit has fallen 15.2%. Its operating profit margin is 17.5%.

Returns of utility stocks with low implied volatilities

Duke Energy (DUK) was the only loser in the last five days among low-implied-volatility utility stocks. On April 21, 2017, Barclays increased its target price on DUK by $6 to $88. The stock rose 0.2% on the same day.

American Water Works Company (AWK) rose the most in the last five days among low implied volatility utility stocks.

On April 19, 2017, AWK announced that it will report its 1Q17 earnings on May 3, 2017. On April 21, 2017, AWK announced a 10.7% rise in its quarterly cash dividend. AWK stock rose ~1.7% on April 21, 2017.

In the next part of this series, we’ll look at utility stocks with the highest short-interest-to-equity float ratios. High short interest in a stock can cause its implied volatility to rise.

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