Vineet Kulkarni

Wall Street analysts gave mixed recommendations after Apache’s quarterly results. Apache shares fell 5% on November 6, 2015, after the earnings release.

According to Wall Street analysts, Southern Company (SO) has a price target of $51.22 compared with its current market price of $51.53. This implies an estimated downside of 0.6%.

US utilities (XLU) are targeting average annual earnings growth of 4%–6% for the next few years.

Dominion Energy’s (D) payout ratio (the percentage of profit that it gave away in the form of dividends) was 81% in 2016, which is higher than the industry average and slightly on the lower side of its five-year payout average of 85%.

With large reductions in cash from operations and heavy burdens of fixed debt repayments, the ratio of debt servicing to operating cash flow rose in 2015.

Currently, Dominion Energy (D) stock is trading at a 1% discount and a 1% premium to its 50-day and 200-day moving averages, respectively.

Southern Company’s management has given an EPS guidance of $1.05 for the third quarter.

US mid-size regulated utilities outperformed their bigger counterparts in the past year. Their rally was much steeper—this boosted total returns.

Southern Company (SO) reported earnings of $0.24 per share for 4Q16.

The rush to US utilities despite their already stretched valuations indicates their safe-haven appeal amid global turmoil.

NextEra Energy (NEE), the biggest component of the Utilities ETF (XLU), had total returns of 130% in the last five years.

Dominion Resources (D) depends upon both internal and external sources of financing for its capital expenses and dividend payments.

In the past couple of months, institutions have increased their positions in Exelon by nearly 2%, from 85.6% to 87.2%, as of October 3, 2016.

PPL’s (PPL) management expects fair annual earnings growth of 5%-6% through 2020, which will likely facilitate its dividend growth.

The utility sector, among the most vulnerable to interest rate hikes, seems strong despite the rate hike in mid-June.

In 4Q15, AES Corporation is expected to report earnings of $0.33 per share in 4Q15—compared to earnings of $0.41 per share in 4Q14.

American Electric Power (AEP) has an attractive debt profile, with the company’s debt making up just 7% of its consolidated debt.

According to Wall Street analysts, NextEra Energy (NEE) has the potential to rise 11% during the next year.

US utilities have been one of the main beneficiaries of the near-zero interest rate environment for the past ten years.

The expected rise in US interest rates later this year may dent the profitability of utilities, given their higher outflows toward debt servicing.

Dominion Energy (D), the third-largest utility, declared a per share dividend of $0.84 per share for 1Q18 last month.

New power generation capacity additions in 2015 were mainly contributed by wind, natural gas, and solar. This trend is expected to persist in 2016 as well.

AES’s management forecasts an 18% fall in EPS (earnings per share) this year due to currency fluctuations and weaker power prices globally.

Institutional investors decreased their positions in NRG Energy (NRG) in June 2016.

For the last 12 months, Southern Company’s (SO) payout ratio was ~76%, while Duke Energy’s (DUK) ratio was close to 97%.

Currently, Duke Energy (DUK) stock is trading 3% above its 50-day moving average and 3% below its 200-day moving average.

Xcel Energy’s (XEL) capital spending plan and actions to reduce regulatory lags could improve its earnings growth significantly during the next few years.

Dominion Energy (D) and NextEra Energy (NEE) are both offering double-digit dividend growth for the next few years.

Sempra Energy paid annual dividends totaling $3.02 per share in 2016, while EIX and PCG paid per-share dividends of $1.98 and $1.93, respectively, in 2016.

Renewables giant NextEra Energy (NEE) has once again shown its mettle, continuing its strong quarterly earnings streak.

Duke Energy’s (DUK) dividend growth rate in the last five years was well below the industry average.

NextEra Energy (NEE) is estimated to report earnings of $1.53 per share for 1Q17. It reported earnings of $1.55 per share in 1Q16.

Duke Energy (DUK) aims to increase its dividend per share 4%–6% annually for the next few years, which is in line with the industry average.

NextEra Energy (NEE) leads the pack with total returns of 21% in the past year. NextEra Energy increased its dividend per share 13%.

NRG Energy (NRG) stock has nearly doubled this year. Currently, it’s trading at a 25% and 48% premium to its 50-day and 200-day moving average levels.

Southern Company reported adjusted earnings of $0.88 per share for 1Q18 and exceeded the consensus estimates.

Though electric sales have shown flattish growth in the last few years, US utilities have managed to distribute stable or increasing dividends.

Of the 18 analysts tracking Xcel Energy, 13 recommend it as a “hold,” five recommend it as a “buy,” and none recommend it as a “sell.”

Southern Company (SO) stock has continued to show weakness recently amid increasing uncertainty regarding the fate of Plant Vogtle.

Duke Energy stock is currently trading at an EV-to-EBITDA valuation multiple of 12.5x against its five-year historical average of 11.0x.

Dominion Energy’s (D) five-year average valuation multiple is around 14x, while the industry average is near 10x.

PPL projects earnings growth of 6%–8% annually for US utilities for the next few years, while its UK segment’s earnings are expected to be driven by the movement of the British pound.

According to Wall Street analysts, the top constituent of the S&P 500 Utilities Index, NextEra Energy (NEE), has a price target of $149.08 against its current market price of $141.07.

Utilities borrowed heavily in the post-financial crisis in order to take advantage of the near-zero interest rates. As a result, the leverage of utilities increased significantly

Duke Energy rallied 9% in 2016, roughly tracking the Utilities Select Sector SPDR. Dominion Resources rose 12% in 2016, while Peer NextEra Energy rose 15%.

Weakness in utilities became evident when the Utilities Select Sector SPDR (XLU) corrected more than 6% after hitting its recent high of $54.63 last month.

Short interest in FirstEnergy rose more than 17% on March 15, 2017. Total shorted shares in the company were 8.7 million on February 28, 2017.

The Sharpe ratio is calculated using standard deviation as its volatility measure.

Currently, utilities are trading at a PE (price-to-earnings) multiple of 13x—compared to their historical average valuation of ~14x–15x.

Analysts expect a 9.2% rise in Dominion Resources (D) over the next year.

Dominion Energy (D), one of the laggards among top utilities this year, seemed strong lately and is currently trading close to an eight-month high.

Of the 21 analysts tracking Dominion Resources on January 20, 2017, four recommended it as a “strong buy,” while three recommended it as a “buy.”

NiSource (NI) reported its 2Q16 earnings on August 2, 2016. It reported net operating earnings of $0.08 per share in the quarter.

Of the total 18 analysts tracking NextEra Energy on December 27, 2016, five recommend it as “strong buy” while 11 recommend it as a “buy.” Two analysts recommend NextEra Energy as a “hold,” and none of the analysts offered a “sell” recommendation.

According to analysts’ consensus, PPL (PPL) stock offers a handsome potential upside of ~22% in a year with a mean target price of $33.5.

Energy Transfer (ET) released its fourth-quarter and full-year 2018 earnings yesterday.

Utilities have been weak compared to the broader markets this year largely due to the strength in the Treasury yields.

Southern Company (SO), one of the largest regulated utilities, finished 2016 on a decent note.

Currently, NRG Energy (NRG) stock is trading at a forward PE ratio of 8.5x based on its estimated EPS in 2019.

Dominion Energy (D) has a target price of $79.31—compared to its current market price of $77.86, which implies an estimated gain of 2%.

Of the 22 analysts tracking Dominion Resources on February 23, 2017, four recommended it as a “strong buy,” while four recommended it as a “buy.”

At 4.8%, Southern Company is currently the highest-yielding utility among the top utilities in the sector.

Dominion Energy (D) announced its agreement to buy SCANA (SCG) on January 3, 2017. The deal is expected to accelerate Dominion Energy’s earnings growth.

NextEra Energy (NEE) paid annual dividends of $3.48 per share in 2016, while Southern Company (SO) paid $2.22 per share last year.

Let’s have a look at the price targets for top utilities in this part of our series. According to Wall Street analyst consensus, Southern Company (SO) stock has a price target of $51.47.

Analysts have given Southern Company (SO) a consensus price target of $50.81 for the next year. This price target indicates a potential fall of 0.4%.

Of the 14 analysts tracking NRG Energy, five recommend it as a “buy,” four recommend it as a “strong buy,” and five recommend it as a “hold.”

NextEra Energy (NEE) will likely report its second-quarter earnings on July 24. The utility is expected to report an EPS of $2.28 for the quarter ended June 30.

Investors may prefer to remain safe during turbulent times and could turn to utilities as Brexit becomes a reality.

According to Wall Street analysts, NRG Energy’s (NRG) price target for the next year is $20.36. That implies an estimated rise of nearly 12.0%.

American Electric Power (AEP), one of the largest utilities in the country, has declared a dividend of $0.59 per share for the third quarter of 2017.

Currently, NRG Energy (NRG) is trading at an EV-to-EBITDA valuation of ~12x—compared to its five-year historical average valuation of 11x.

NRG Energy (NRG), the leading merchant power player stock and one of the smallest components of the S&P 500 Utilities Index (XLU), has a mean price target of $36.50 against its current market price of $31.20.

So far, Barrick Gold (GOLD) stock has been trading in a narrow range in the fourth quarter. The stock has risen almost 30% in 2019.

NextEra Energy (NEE) paid dividends of $3.48 per share in 2016. In 2017, it’s expected to pay dividends of $3.93 per share.

US water utilities saw a big stock rally 1H16, rising more sharply than electric utilities. But they’ve lost most of those gains so far in 2H16.

Duke Energy reported total revenues of $6.5 billion in 3Q17 against its revenues of $6.8 billion in the corresponding quarter last year.

NRG Energy (NRG) stock seems to be trading at a fair valuation compared to the industry average and its historical average.

Although utilities’ total returns were dominated mostly by stock appreciation this year, stable and increasing dividends were also an important factor.

Utilities witnessed an even harsher fall amid broader markets’ sell-off. However, utilities outperformed the S&P 500 in 2018.

Capacity additions in wind power have been quite volatile over the past few years due to uncertainty over tax incentive policies.

Among the ten analysts tracking NRG Energy, four recommended a “strong buy,” five recommended a “buy,” and one recommended a “hold.”

The Vanguard Group added net 0.46 million shares of Public Service Enterprise Group (PEG) in 4Q17.

Exelon Corporation (EXC) reported its third quarter earnings on October 26, 2016. It reported earnings of $0.91 per share for the quarter.

Broader utilities (XLU) have witnessed notable weakness recently mainly due to the strength in Treasury yields.

Wall Street analysts have given AES (AES) an estimated median price target of $13. It implies a possible upside of 3% in the next year.

Of the 18 analysts tracking FirstEnergy (FE), eight recommend “buy,” six recommend “hold,” and four recommend “strong buy.”

Southern Company stock underperformed utilities at large and the broader markets in the last five years. Southern Company stock rose 1% in the past year.

NextEra Energy (NEE) beat its peers in terms of returns in the last few years. NextEra Energy returned 14% in 2018.

There was a tsunami in NRG Energy (NRG) shares on July 12, 2017. NRG Energy stock opened 19% up and maintained the uptrend throughout the day.

Wall Street analysts still seem positive about NextEra Energy (NEE), particularly because it’s risen so much compared to last year’s levels, resulting in its premium valuation.

The large swings for PG&E (PCG) stock may not end anytime soon.

Analysts estimate that Duke Energy has a one-year price target of $80.4, which implies an estimated upside of ~3.5% from its current market price of $77.75.

Dominion Resources (D) paid annual dividends of $2.80 in 2016. Duke Energy (DUK) paid dividends of $3.36 per share last year.

US utility stocks slipped 0.8% on May 15 after ten-year Treasury yields peaked at 3.1%—a seven-year high. Broader markets also corrected 0.7%.

Analysts are expecting NiSource (NI) to report earnings per share (or EPS) of $0.07 in 2Q16. In the same quarter last year, it posted EPS of $0.18.

The consensus analyst price target for Southern Company (SO) is $50.76. Its current market price is $49.78, implying a rise of 2% over the next year.

In the last year, American Electric Power returned 21%—compared to broader utilities’ average returns of ~11%. During the same period, SPY returned 22%.

According to Wall Street analysts’ estimates, NiSource (NI) has a one-year median price target of $25.11 compared to its current market price of $25.94.

Utility ETFs have performed well in the last one year. The Vanguard Utilities Fund ETF (VPU) has been no exception to this.