Valuation

Xcel Energy (XEL) and Consolidated Edison (ED) stocks fell more than 10% late last month. The stocks mirrored weakness in the overall utilities space. Xcel Energy is trading at a forward PE ratio of 18x based on analysts’ estimated EPS in 2019. Xcel Energy’s average historical valuation is close to 18x, while utilities at large are valued around 17x. Xcel Energy stock seems to be trading at a marginal premium compared to its five-year historical average and peers’ average.

Analyzing Xcel Energy and Consolidated Edison’s Valuation

Analysts expect Xcel Energy’s EPS growth to be above 6%, which is higher than peers’ average EPS growth for 2019. Xcel Energy’s marginally higher premium valuation seems justified.

Consolidated Edison

Consolidated Edison (ED) is trading at a forward PE ratio of 17x, which is close to peers’ average valuation and higher than its own five-year historical average of ~15x. Consolidated Edison stock seems fairly valued compared to its peers. Consolidated Edison seems to be trading at a premium compared to its historical valuation. Analysts expect Consolidated Edison to have flattish EPS growth in 2019.

The biggest constituent of the Utilities ETF (XLU), NextEra Energy (NEE) is trading at a forward PE ratio of 21x based on analysts’ estimated EPS for the next 12 months. NextEra Energy looks to be trading at a premium compared to its historical valuation and its peers. Southern Company (SO) stock is valued at a forward PE ratio of 14.5x, while Duke Energy (DUK) is valued at 17x.

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