uploads/2017/08/stk-price-1.jpg

How SO, ETR, and FE Utilities Have Performed Recently

By

Updated

Market performance

The three utilities under our consideration in this series have all underperformed peers by a fair margin in the past year. During this period, the Utilities Select Sector SPDR (XLU) has risen ~7%, while Southern Company (SO) fallen 7%, and FirstEnergy (FE) and Entergy (ETR) have corrected by 3% apiece. The SPDR S&P 500 (SPY) has managed to surge 15% in the past year.

stk price

By comparison, NextEra Energy (NEE) has outperformed broader utilities and has risen 17% in the past year, while Duke Energy (DUK) has managed to gain 2% during the same period.

Article continues below advertisement

Southern Company underperforms

SO stock has shown a dismal performance recently due to its ongoing power plant issues. Frequent delays and huge cost overruns at its Kemper County and Vogtle nuclear power plant might dent cash flows and could negatively impact earnings. In 2Q17, SO reported a $3.0-billion estimated loss at its Kemper County power plant.

FirstEnergy has been witnessing volatile earnings for the past several quarters. Falling wholesale power prices and weak electricity demand growth have made its earnings unstable. Its volatile earnings also largely influenced its stock price movement.

Notably, Entergy generates large portion of its total earnings from competitive operations, which has impacted its stock movement.

Total returns

SO’s returns (including dividends) in the past year come to -3%, while XLU has returned 11%. FirstEnergy’s total returns come to 2%, while Entergy has returned 3%.

In the past five years, SO has returned 5%, while XLU has returned 12%, compounded annually. Entergy’s total returns come in at 5.5%.

This means that our three highest-yielding utility stocks in the sector have severely lagged behind peers in terms of total returns, largely due to sliding stock movements.

Advertisement

More From Market Realist