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4 Alternative Energy Stocks to Buy Buoyed by Solid Investments
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Per the U.S. Energy Information Energy (EIA), wind energy’s share in the nation’s total electricity generation should improve to 12% in 2025. This should bolster alternative energy stocks’ prospects. However, the rising price of wind turbines and the strained U.S.-China relationship might impact the growth rate of these stocks. Nevertheless, the booming electric vehicle market, which is expected to witness a CAGR of 18.2% during 2024-2028, should be a key growth catalyst for the alternative energy industry. The forerunners in the U.S. alternative energy industry are Constellation Energy Corporation (CEG - Free Report) , Crescent Energy Company (CRGY - Free Report) , OPAL FUELS Inc. (OPAL - Free Report) and Diversified Energy Company Plc (DEC - Free Report) .
About the Industry
The Zacks Alternative Energy industry can be fundamentally segregated into two sets of companies. While one group is involved in the generation and distribution of alternative energy and electricity from sources like wind, natural gas, biofuel, hydro and geothermal, the other is engaged in the development, design and installation of renewable projects involving these alternative energy sources. The industry also includes a handful of stocks that offer fuel cell energy solutions, which have gained popularity as an affordable clean energy lately. Per a report published by the International Energy Agency (IEA) in February 2024, global clean energy investment has improved 40% since 2020, reaching an estimated $1.8 trillion in 2023. This surely reflects the solid growth opportunities that the clean energy industry has to offer to its participants.
3 Trends Shaping the Future of the Alternative Energy Industry
Wind Energy – A Key Growth Catalyst: Among alternative energy sources, wind energy has been making noticeable progress in the United States. Per a report by EIA, wind turbines were the source of about 10.3% of total U.S. utility-scale electricity generation in 2022. Looking ahead, per EIA’s latest Short-Term Energy Outlook published in January 2024, wind generation in the United States is projected to increase 30 billion kWh in 2024, while wind energy’s share in total electricity generation is anticipated to reach 12% in 2025. This reflects a solid growth opportunity for the U.S. wind market at present, which, in turn, should boost the overall expansion of the alternative energy industry.
EV Market Boom to Boost Clean Energy: With enhanced environmental awareness, more individuals are choosing to switch from gasoline-powered vehicles to EVs each year, thereby boosting the market for EVs. In the United States, favorable government policies and support in terms of subsidies and grants, tax rebates, and other non-financial benefits in the form of carpool lane access, along with declining battery prices, have been boosting the EV market. To this end, it is imperative to mention that the U.S. EV market size is expected to register a CAGR of 18.2% between 2024 and 2028, as estimated by a report from Statista. Such an impressive outlook bolsters the prospects of clean energy stocks, which offer the largest electric vehicle charging network in the United States.
Rising Costs & Other Headwinds: The steadily rising cost of renewable installations in recent times has been posing a significant challenge for the clean energy installers. In particular, the rising price of steel, which is used to make the giant wind turbine blades, has been pushing up the cost of wind installation lately.
Apart from steel, the most significant mineral requirements in the wind industry are copper, zinc, manganese, chromium, nickel, molybdenum and rare earths. The average price of these seven metals has risen 93% between January 2020 and March 2023 (as stated by an IMF report). Resultantly, the levelized cost of electricity of a subsidized U.S. offshore wind project has increased almost 50% in 2023 from the 2021 level in nominal terms, according to a report published by BloombergNEF in August 2023.
Further, the fallout in the bilateral relationship with China can have a direct impact on the green energy industry. This is because China accounts for up to 90% of refining capacity for the so-called rare earth elements used in electric motors, wind turbine generators and other green energy products, per the Energy Transitions Commission. So, any deterioration in the relationship with China might impact the green energy supply chain in the United States, thereby impacting the alternative energy industry.
Zacks Industry Rank Reflects Bright Outlook
The Zacks Alternative Energy industry is housed within the broader Zacks Oils-Energy sector. It carries a Zacks Industry Rank #83, which places it in the top 33% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is due to a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts have gained confidence in this group’s earnings growth potential over the past few months. The industry’s earnings estimate for the current fiscal year has moved down 3.2% to $1.63 per share since Jan 31.
Before we present a few alternative energy stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags S&P 500 & Sector
The Alternative Energy Industry has underperformed the Zacks S&P 500 Composite and its sector over the past year. The stocks in this industry have collectively rose 6.1% in the past year compared with the Oils-Energy Sector’s 11.1% growth. The Zacks S&P 500 Composite has gained 27.2% in the same time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month EV/EBITDA ratio, which is commonly used for valuing alternative energy stocks, the industry is currently trading at 8.05 compared with the S&P 500’s 15.04 and the sector’s 3.10.
Over the past five years, the industry has traded as high as 9.01X, as low as 7.58X and at the median of 8.35X, as the charts show below.
EV-EBITDA Ratio (TTM)
4 Alternative Energy Stocks to Buy
Crescent Energy Company: Based in Fort Worth, TX, it is an independent oil and natural gas company, which acquires, explores, develops, exploits and produces crude oil and natural gas properties principally in the shallow waters of the Gulf of Mexico and onshore properties in Texas, Oklahoma, Louisiana and Wyoming in the United States. On Mar 4, 2024, Crescent Energy announced fourth-quarter and full-year 2024 results. The company drilled 15 and brought online 20 gross operated wells during the fourth quarter. Backed by the quarterly performance, Crescent has realized continued operational efficiency gains, lowering costs and improving well performance.
CRGY boasts a four-quarter average earnings surprise of 74.16%. The consensus estimate for the company’s 2024 sales is pegged at $2.42 billion, implying an improvement of 1.4% from the previous year’s reported figure. CRGY currently sports a Zacks Rank #1 (Strong Buy).
Price & Consensus: CRGY
Diversified Energy Company: Based in Birmingham, AL, it is an energy company, focused on natural gas and liquids production, transport, marketing and well retirement. On Apr 4, 2024, Diversified Energy Company released its fifth annual Sustainability Report, highlighting its sustainability actions and achievements in 2023. Per the report, the company has reduced methane intensity by 33% year over year in 2023 and retired record 404 wells. This should boost DEC’s progress in the carbon emission reduction initiative.
The consensus estimate for the company’s 2024 earnings is pegged at $2.17, implying an improvement of 47.6% from the previous year’s reported figure. The consensus estimate for DEC’s 2024 sales is pegged at $977.6 million, implying an improvement of 12.6% from the prior-year reported actuals. The company currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price & Consensus: DEC
OPAL FUELS: Based in White Plains, NY, the company is a vertically integrated renewable fuels platform, involved in the production and distribution of renewable natural gas for the heavy-duty truck market. On Mar 13, 2024, OPAL FUELS announced fourth-quarter and full-year 2023 results. Its fourth-quarter revenues improved 30% year over year to $87 million.
The consensus estimate for the company’s first-quarter 2024 earnings is pegged at 10 cents per share, implying a significant improvement from the year-ago quarter’s reported loss of 6 cents. The consensus estimate for OPAL’s 2024 sales is pegged at $388.2 million, implying an improvement of 51.6% from the previous year’s reported figure. The company currently sports a Zacks Rank #1.
Price & Consensus: OPAL
Constellation Energy: Based in Baltimore, MD, the company is the nation's largest producer of carbon-free energy and provides sustainable solutions to homes, businesses and public-sector customers. On Apr 3, 2024, Constellation Energy announced that its credit rating was upgraded by the credit rating firm, Moody’s Investor Services, based on the company’s improved debt coverage metrics and strong financial performance, driven by climate policies that recognize the value of nuclear as a reliable clean energy resource. This should elevate CEG’s position in the alternative energy industry.
CEG boasts a long-term earnings growth rate of 28%. The consensus estimate for the company’s first-quarter 2024 sales is pegged at $8.40 billion, implying an improvement of 11.1% from the year-ago quarter’s reported figure. CEG currently carries a Zacks Rank #2 (Buy).
Price & Consensus: CEG
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4 Alternative Energy Stocks to Buy Buoyed by Solid Investments
Per the U.S. Energy Information Energy (EIA), wind energy’s share in the nation’s total electricity generation should improve to 12% in 2025. This should bolster alternative energy stocks’ prospects. However, the rising price of wind turbines and the strained U.S.-China relationship might impact the growth rate of these stocks. Nevertheless, the booming electric vehicle market, which is expected to witness a CAGR of 18.2% during 2024-2028, should be a key growth catalyst for the alternative energy industry. The forerunners in the U.S. alternative energy industry are Constellation Energy Corporation (CEG - Free Report) , Crescent Energy Company (CRGY - Free Report) , OPAL FUELS Inc. (OPAL - Free Report) and Diversified Energy Company Plc (DEC - Free Report) .
About the Industry
The Zacks Alternative Energy industry can be fundamentally segregated into two sets of companies. While one group is involved in the generation and distribution of alternative energy and electricity from sources like wind, natural gas, biofuel, hydro and geothermal, the other is engaged in the development, design and installation of renewable projects involving these alternative energy sources. The industry also includes a handful of stocks that offer fuel cell energy solutions, which have gained popularity as an affordable clean energy lately. Per a report published by the International Energy Agency (IEA) in February 2024, global clean energy investment has improved 40% since 2020, reaching an estimated $1.8 trillion in 2023. This surely reflects the solid growth opportunities that the clean energy industry has to offer to its participants.
3 Trends Shaping the Future of the Alternative Energy Industry
Wind Energy – A Key Growth Catalyst: Among alternative energy sources, wind energy has been making noticeable progress in the United States. Per a report by EIA, wind turbines were the source of about 10.3% of total U.S. utility-scale electricity generation in 2022. Looking ahead, per EIA’s latest Short-Term Energy Outlook published in January 2024, wind generation in the United States is projected to increase 30 billion kWh in 2024, while wind energy’s share in total electricity generation is anticipated to reach 12% in 2025. This reflects a solid growth opportunity for the U.S. wind market at present, which, in turn, should boost the overall expansion of the alternative energy industry.
EV Market Boom to Boost Clean Energy: With enhanced environmental awareness, more individuals are choosing to switch from gasoline-powered vehicles to EVs each year, thereby boosting the market for EVs. In the United States, favorable government policies and support in terms of subsidies and grants, tax rebates, and other non-financial benefits in the form of carpool lane access, along with declining battery prices, have been boosting the EV market. To this end, it is imperative to mention that the U.S. EV market size is expected to register a CAGR of 18.2% between 2024 and 2028, as estimated by a report from Statista. Such an impressive outlook bolsters the prospects of clean energy stocks, which offer the largest electric vehicle charging network in the United States.
Rising Costs & Other Headwinds: The steadily rising cost of renewable installations in recent times has been posing a significant challenge for the clean energy installers. In particular, the rising price of steel, which is used to make the giant wind turbine blades, has been pushing up the cost of wind installation lately.
Apart from steel, the most significant mineral requirements in the wind industry are copper, zinc, manganese, chromium, nickel, molybdenum and rare earths. The average price of these seven metals has risen 93% between January 2020 and March 2023 (as stated by an IMF report). Resultantly, the levelized cost of electricity of a subsidized U.S. offshore wind project has increased almost 50% in 2023 from the 2021 level in nominal terms, according to a report published by BloombergNEF in August 2023.
Further, the fallout in the bilateral relationship with China can have a direct impact on the green energy industry. This is because China accounts for up to 90% of refining capacity for the so-called rare earth elements used in electric motors, wind turbine generators and other green energy products, per the Energy Transitions Commission. So, any deterioration in the relationship with China might impact the green energy supply chain in the United States, thereby impacting the alternative energy industry.
Zacks Industry Rank Reflects Bright Outlook
The Zacks Alternative Energy industry is housed within the broader Zacks Oils-Energy sector. It carries a Zacks Industry Rank #83, which places it in the top 33% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is due to a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts have gained confidence in this group’s earnings growth potential over the past few months. The industry’s earnings estimate for the current fiscal year has moved down 3.2% to $1.63 per share since Jan 31.
Before we present a few alternative energy stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags S&P 500 & Sector
The Alternative Energy Industry has underperformed the Zacks S&P 500 Composite and its sector over the past year. The stocks in this industry have collectively rose 6.1% in the past year compared with the Oils-Energy Sector’s 11.1% growth. The Zacks S&P 500 Composite has gained 27.2% in the same time frame.
One-Year Price Performance
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Industry's Current Valuation
On the basis of the trailing 12-month EV/EBITDA ratio, which is commonly used for valuing alternative energy stocks, the industry is currently trading at 8.05 compared with the S&P 500’s 15.04 and the sector’s 3.10.
Over the past five years, the industry has traded as high as 9.01X, as low as 7.58X and at the median of 8.35X, as the charts show below.
EV-EBITDA Ratio (TTM)
4 Alternative Energy Stocks to Buy
Crescent Energy Company: Based in Fort Worth, TX, it is an independent oil and natural gas company, which acquires, explores, develops, exploits and produces crude oil and natural gas properties principally in the shallow waters of the Gulf of Mexico and onshore properties in Texas, Oklahoma, Louisiana and Wyoming in the United States. On Mar 4, 2024, Crescent Energy announced fourth-quarter and full-year 2024 results. The company drilled 15 and brought online 20 gross operated wells during the fourth quarter. Backed by the quarterly performance, Crescent has realized continued operational efficiency gains, lowering costs and improving well performance.
CRGY boasts a four-quarter average earnings surprise of 74.16%. The consensus estimate for the company’s 2024 sales is pegged at $2.42 billion, implying an improvement of 1.4% from the previous year’s reported figure. CRGY currently sports a Zacks Rank #1 (Strong Buy).
Price & Consensus: CRGY
Diversified Energy Company: Based in Birmingham, AL, it is an energy company, focused on natural gas and liquids production, transport, marketing and well retirement. On Apr 4, 2024, Diversified Energy Company released its fifth annual Sustainability Report, highlighting its sustainability actions and achievements in 2023. Per the report, the company has reduced methane intensity by 33% year over year in 2023 and retired record 404 wells. This should boost DEC’s progress in the carbon emission reduction initiative.
The consensus estimate for the company’s 2024 earnings is pegged at $2.17, implying an improvement of 47.6% from the previous year’s reported figure. The consensus estimate for DEC’s 2024 sales is pegged at $977.6 million, implying an improvement of 12.6% from the prior-year reported actuals. The company currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price & Consensus: DEC
OPAL FUELS: Based in White Plains, NY, the company is a vertically integrated renewable fuels platform, involved in the production and distribution of renewable natural gas for the heavy-duty truck market. On Mar 13, 2024, OPAL FUELS announced fourth-quarter and full-year 2023 results. Its fourth-quarter revenues improved 30% year over year to $87 million.
The consensus estimate for the company’s first-quarter 2024 earnings is pegged at 10 cents per share, implying a significant improvement from the year-ago quarter’s reported loss of 6 cents. The consensus estimate for OPAL’s 2024 sales is pegged at $388.2 million, implying an improvement of 51.6% from the previous year’s reported figure. The company currently sports a Zacks Rank #1.
Price & Consensus: OPAL
Constellation Energy: Based in Baltimore, MD, the company is the nation's largest producer of carbon-free energy and provides sustainable solutions to homes, businesses and public-sector customers. On Apr 3, 2024, Constellation Energy announced that its credit rating was upgraded by the credit rating firm, Moody’s Investor Services, based on the company’s improved debt coverage metrics and strong financial performance, driven by climate policies that recognize the value of nuclear as a reliable clean energy resource. This should elevate CEG’s position in the alternative energy industry.
CEG boasts a long-term earnings growth rate of 28%. The consensus estimate for the company’s first-quarter 2024 sales is pegged at $8.40 billion, implying an improvement of 11.1% from the year-ago quarter’s reported figure. CEG currently carries a Zacks Rank #2 (Buy).
Price & Consensus: CEG