Dominion Energy
’s
D
portfolio realignment strategy, and plans to invest $23.9 billion in the 2020-2022 time period to strengthen its existing infrastructure and add renewable assets to the generation portfolio will boost its performance.
This Zacks Rank #3 (Hold) stock delivered an average earnings surprise of 2.5% in the last four quarters. The Zacks Consensus Estimate for its 2021 earnings has moved up 0.5% in the past 60 days to $3.89 per share. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
Tailwinds
Dominion plans to invest $23.9 billion in the 2020-2022 time period to strengthen its existing infrastructure. The company plans to invest $8.2 billion in 2020, out of which 70% will be invested in growth projects and the rest for the maintenance of existing assets. Over the next 15 years, it aims to invest $55 billion to strengthen its infrastructure and add more clean power generation assets to its portfolio.
Dominion has started operation of the 1,588-megawatt (MW) Greensville County project, which will assist the company to lower emissions and be accretive to earnings. The company is in the process of adding 3,000 MW of solar or wind generation in the state of Virginia by 2022. Its long-term objective is to add 28.3 gigawatts of battery storage, solar, hydro and wind (offshore as well as onshore) projects by 2035, as well as increase renewable energy capacity by more than 15% per year, on average, over the next 15 years.
Dominion continues to replace aging equipment to improve system reliability and serve the customer base more efficiently. The company is also working on a project of strategic undergrounding of 4,000 miles of distribution lines. Notably, it has already completed undergrounding 1,300 miles of distribution lines. These initiatives will increase resilience of its operations and enable it to serve the expanding customer base more efficiently.
Headwinds
Dominion and its gas unit depend on third-party producers for the supply of natural gas. If a producer refuses to deliver a specific quantity of natural gas or natural gas liquid (NGL) to Dominion, it would consequently reduce the volume of natural gas and NGL available for the company’s pipelines and other assets. In case Dominion fails to replace the lost volumes, revenues will certainly be affected.
After investing billions of dollars and working for almost six years to complete the Atlantic Coast Pipeline project, the company and its partner
Duke Energy
DUK
decided to discontinue the project. Legal challenges surrounding the project have created uncertainty and increased the project’s cost. This is a major setback for the company and will hurt its goal of expanding natural gas infrastructure.
Price Performance
In the year-to-date period, shares of Dominion have lost 4.4% compared with the
industry
’s 5.8% decline.
Stocks to Consider
A couple of better-ranked utilities include
Otter Tail Corporation
OTTR
and
Portland General Electric Company
POR
, each presently carrying Zacks Rank #2 (Buy).
Otter Tail delivered an earnings surprise of 9.9%, on average, in the trailing four quarters. The Zacks Consensus Estimate for 2021 earnings has been revised 6.5% upward in the past 60 days.
Portland General Electric Company delivered an earnings surprise of 98.1%, on average, in the trailing four quarters. The Zacks Consensus Estimate for 2021 earnings has been revised 2.7% upward in the past 60 days.
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