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 analysts’ estimates, Southern Company (SO) has a one-year median price target of $50.88, implying an upside of a mere 3% in the next year.

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.

Nuveen LLC added ~2.0 million shares of FirstEnergy and increased its stake to 2.6% on June 30.

Of the 17 analysts tracking Xcel Energy, 11 recommend it as a “hold” and four recommend it as a “buy.” Two analysts recommended it as a “sell” on August 3, 2016.

Western Refining recorded another strong quarter financially and operationally. It recorded the most profitable quarter ever in the retail segment.

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.

AES Corporation (AES) has rallied steeply in the last year, rising more than 21%. The Utilities Select Sector SPDR ETF (XLU) has risen nearly 8% in the same period.

Southern Company will announce its 3Q16 financial results on October 31, 2016. For the quarter, analysts are expecting the company to report sales of $6 billion.

US water utilities have distributed fair dividends during the past few quarters. American Water Works’ dividend growth in the last five years stands at 10%.

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.

On March 27, 2017, Calpine stock was trading at an EV-to-EBITDA valuation multiple of 10.0x. US utilities’ (XLU) average multiple is just above 10.0x.

$12 billion CMS Energy has one of the highest earnings growth rates in the industry. The company forecasts that it will grow 5%–7% in 2016 and 6%–8% thereafter.

FirstEnergy is trading at $40.4, which is ~4% and 8% above its 50-day and 200-day moving average levels, respectively.

Chart indicators As we discussed earlier, Exelon (EXC) has gained more than 11% so far this year, while in the last year, it has managed to rise by just 3%. On March 16, 2017, Exelon was trading 1% and 4% above its 50-DMA (day moving average) and 200-DMA, respectively. Exelon’s chart indicators look stable, and […]

Sempra Energy Sempra Energy (SRE) became California’s biggest utility by market capitalization after PG&E’s (PCG) epic fall last month. The Vanguard Group, which holds 7.2% of Sempra Energy’s outstanding shares, added 0.34 million shares in 3Q17. At the end of September 30, 2017, Vanguard held 18.1 million Sempra Energy shares. According to a recent report, […]

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.

The steep rally of utilities ended after investors offloaded the stock based on valuations. The Fed’s projected interest rate hike is a key driver.

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

Dominion Energy (D), the third-largest utility by market cap, will report its fourth-quarter and 2018 earnings results on February 1.

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.

PPL has utility operations spread over the eastern United States and the United Kingdom. It derives more than half of its earnings from its UK operations.

The Vanguard Group was the top institutional investor in midstream C corporation Kinder Morgan (KMI) during the fourth quarter.

According to the EIA (U.S. Energy Information Administration), retail electricity prices were $0.10 per kilowatt-hour in 1Q17, 1.7% higher compared to 1Q16.

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.

US utility stocks continued to recover last week after being weak for more than three months. The Utilities Select Sector SPDR ETF (XLU) rose almost 3%.

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

NextEra Energy (NEE) is trading at a comparatively lower forward dividend yield than its peers. However, it has the highest expected dividend growth in the next two years.

Merchant power producers have been under tremendous pressure in the last few years due to many factors.

Currently, FirstEnergy stock is trading at a forward PE multiple of 14.8x—lower than peers’ average forward PE multiple of over 17x.

The rallying US dollar has marred AES’s earnings. This has been reflected in its stock performance. AES has lost more than 18% in the last 12-month period.

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.

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

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.

Energy Transfer (ET) stock continues to trade weak. The stock hit a new 52-week low of $12.75 on December 18.

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.

US utilities were trading at a dividend yield premium of ~180 basis points–200 basis points to benchmark Treasury yields during mid-2017.

NRG Energy (NRG) offers a potential upside of more than 11% compared to its current market price of $42.3.

Analysts are expecting CNP’s earnings to come in at $0.23 per share in 4Q15 versus its earnings of $0.36 per share in 4Q14.

At the end of the fourth quarter of 2018, Sempra Energy (SRE) had a net debt of $25.2 billion.

Exelon (EXC) expects that dismal load growth may continue in 2016. This dismal growth could be partially offset by customer base growth.

The broader markets recently witnessed a significant surge in volatility levels. On October 12, implied volatility in the S&P 500 was ~17%.

Merchant power companies have dug a deep hole in investors’ pockets in the last one year.

The Vanguard Group is the largest institutional investor in renewables titan NextEra Energy (NEE).

Sempra Energy (SRE) stock appears to be trading at a fair premium. On October 31, 2017, it was trading at an EV-to-EBITDA valuation multiple of 15.4x.

As of July 29, 2016, Public Service Enterprise Group (PEG) is trading at an EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 9x.

PPL reported better-than-expected earnings in the second quarter. The company’s earnings grew 6% compared to the same period last year.

US water utilities have witnessed flat sales growth for the past couple of years, primarily due to efficiency programs.

Recently, SCANA became one of the most volatile stocks in the S&P 500 Utilities Index (XLU). On October 3, 2017, SCANA had an implied volatility of 30%.

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

FirstEnergy stock rose 1% and closed at $31.33 on its earnings day. The stock has seen some positive momentum during the last few trading sessions.

Currently, NiSource (NI) is trading at a forward dividend yield of 2.7%.

Xcel Energy (XEL), a $21 billion utility, hit an all-time high on March 31, 2016, and closed at $41.82. It has outperformed utilities by a huge margin, rising 20% so far this year.

Exelon will report its 4Q16 and fiscal 2016 financial results on February 8, 2017. Analysts expect it to report total revenues of $7,488 million for 4Q16.

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%.

Cheap natural gas has outperformed coal, pushing coal’s share in power generation down to 27.6% in December 2015, compared to natural gas’s ~34% share.

FirstEnergy (FE) is estimated to report earnings of $0.74 per share for the quarter ended March 31, 2017. For 1Q16, FirstEnergy reported earnings of $0.80 per share.

Energy Transfer looks relatively expensive compared to its peers. Energy Transfer is trading at a forward EV-to-EBITDA multiple close to 11x.

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

US utilities seem to be at a critical juncture at the moment.

SCG is currently trading at an EV-to-EBITDA valuation of 9.5x compared to the utilities’ average of 11.0x.

Pacific Gas & Electric Corporation (PCG) closed with a minimal gain after the announcement of its quarterly earnings yesterday. PG&E Corporation has managed to rise 6% so far this year.

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.

So far in 2016, Duke has risen more than 10%, in line with its peer utilities (XLU). The Fed’s status quo on interest rates in its April meeting may prompt a further utilities rally.

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.

Kinder Morgan is trading at a forward EV-to-EBITDA valuation multiple close to 10.3x, which is lower than many of its peers.

PPL Corporation (PPL) is expected to report EPS of $0.56 for the third quarter.

At the end of the third quarter, Sempra Energy’s net debt-to-EBITDA ratio was 6.7x—higher than its historical average of ~5x.

Xcel Energy’s (XEL) stock outperformed peers in the last year. In this period, it gained more than 8% while the Utilities Select Sector SPDR (XLU) rose more than 2%.

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.

Analysts seem to be cautious about Xcel Energy stock. RBC raised Xcel Energy’s target price from $49.0 to $53.0 on January 18.

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.

AES’s (AES) management has lowered its adjusted earnings guidance by $0.10, from $1.05 per share to $0.95 per share for 2016.

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

All California utilities, including PG&E Corporation, Edison International, and Sempra Energy, have outperformed utilities at large in the last year.

Recently, NextEra Energy’s solid earnings growth was reflected in its market performance. NextEra Energy stock has outperformed broader utilities.

Dynegy (DYN) has taken an aggressive stance from the last couple of quarters and has added several power generation assets to its current portfolio.

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.

After sailing through rough seas for the past few years, Energy Transfer Equity (ETE) seems to have attractive prospects going forward.

NRG Energy (NRG) stock has doubled in the last one year.

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.”

Williams Companies (WMB) has very small exposure to the Permian Basin. The company displayed flattish EBITDA growth in the first half of 2018.

Of the 23 analysts tracking NextEra, 18 have given it “buy” recommendations, and five have given it “hold” recommendations. None has recommended a “sell.”

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