The
Zacks Utility – Electric Power
industry stocks are entrusted with the duty to supply electricity 24×7 to their millions of customers across the United States. Even during the ongoing pandemic and a very active hurricane season, these utility stocks tried their best to provide uninterrupted power to their users. The regulated nature and domestic focus make utility stocks the safest investment bets. Moreover, the ability to pay dividends at regular intervals makes them more attractive than bonds as the prevailing interest rates are near-zero levels.
The
Utilities
sector is capital intensive in nature and the near-zero interest rates enable the operators to make necessary capital investments in their long-term growth projects when internal sources of funds are not sufficient. Amid the ongoing pandemic, the utilities continued with their long-term infrastructure projects to increase resilience of their services and make their generation portfolio clean.
A transition is quite evident in the utility space with the operators setting their respective targets of cutting down on emission and focusing on generating more electricity from alternate sources and natural gas. The usage of new technology and development of large-scale battery storage projects are making the alternate source of energy more reliable and popular among the electricity producers.
Remarkably, the Utilities sector has gained 8.3% in the past three months, outperforming the S&P 500 group’s rally of 7.7%.
Amid such favorable trends and with economic activities reopening, we run a comparative analysis of two prominent electric power utilities, namely
Dominion Energy, Inc.
D
and
Duke Energy Corporation
DUK
to determine which stock is better poised right now.
Both stocks currently carry a Zacks Rank #3 (Hold). Dominion Energy and Duke Energy have a market capitalization of $61.11 billion and $67.37 billion, respectively. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
Estimate Movement
While the Zacks Consensus Estimate for Dominion Energy’s 2021 earnings per share has moved 0.5% north to $3.89, the same for Duke Energy has dipped 0.4% to $5.21 in the past 60 days.
Earnings Surprise Trend & Long-Term Growth
Dominion Energy delivered a trailing four-quarter surprise of 2.51%, on average. Its long-term (three to five years) earnings growth is projected at 3.76%.
Duke Energy delivered a trailing four-quarter surprise of 1.49%, on average. Its long-term earnings growth rate is pegged at 3.60%.
Return on Equity (ROE)
ROE is the measure of a company’s efficiency in utilizing its shareholders’ funds. Dominion Energy and Duke Energy have a trailing 12-month ROE of 12.19% and 8.28%, respectively. The industry’s ROE for the same period came in at 8.97%.
Debt to Capital
The long-term debt-to-capital ratio is a good indicator of a company’s financial position and shows how much debt is used to run its business. Dominion Energy has a long-term debt-to-capital of 54.15%, lower than Duke Energy’s 54.24%. The utility power industry’s average long-term debt-to-capital is 49.53%.
Investment Plans
Dominion Energy plans to invest $23.9 billion in the 2020-2022 time period to strengthen its existing infrastructure while Duke Energy intends to invest $58 billion in overall growth projects during the 2020-2024 time period.
Price Movement
In the past six months, shares of Dominion Energy have declined 10.9% while the Duke Energy stock has gained 5.2%. The industry has recorded 2.3% growth in the said period.
Result
Both utilities seem a good choice to add to investors’ portfolio in the upcoming year. Also, their capital expenditure plans are on track to enhance their infrastructure and increase the reliability of their services provided. However, Dominion Energy seems to be better positioned for 2021 despite its weak price performance in the past six months.
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