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AGR or EIX: Which Is a Better Utility Power Stock to Pick?

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Utilities operating in the United States are taking measures to strengthen their infrastructure, which will allow operators to lower the possibility of outages during extreme conditions and meet the increasing demand from customers. Per the U.S. Energy Information Administration (“EIA”), the total electricity consumption is expected to improve by 1.6% in 2022 and 1% in 2023 from respective year-ago levels.

Utilities have been benefiting from various favorable factors, such as new electric rates, customer additions, cost management and the implementation of energy-efficiency programs. Moreover, the ongoing investments to improve the resiliency of electric infrastructure and a transition to the cost-effective alternate sources of fuel to produce electricity are advantageous for the power industry.

The performance of capital-intensive domestic-focused utilities is likely to have been adversely impacted by an increase in interest rates from near-zero levels. An increase in borrowing costs and a resultant rise in interest expenses can adversely impact the earnings of companies operating in the space.

The ultimate goal of domestic-focused utilities is to make the system strong, resilient and reliable. Per the EIA, major utilities in the United States have been spending more on delivering electricity to customers and less on producing it.

In this article, we run a comparative analysis on two Utility – Electric Power companies — AVANGRID Inc. (AGR - Free Report) and Edison International (EIX - Free Report) — to decide which stock is a better pick for your portfolio now.

Both the stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1  Rank (Strong Buy) stocks here.

AVANGRID has a market capitalization of $17.7 billion, while the same for Edison International is $23.8 billion.

Growth Projection

The Zacks Consensus Estimate for AVANGRID’s 2022 earnings has moved up by 2.3% in the past 60 days to $5.01 per share.  The Zacks Consensus Estimate for Edison International’s 2022 earnings has moved up by 0.2% in the past 60 days to $6.04 per share.

Earnings Surprise Trend & Long-Term Growth

AGR delivered an average earnings surprise of 3.6% in the last four quarters, while EIX delivered an earnings surprise of 11.5% in the last four quarters.

AVANGRID’s long-term (three to five years) earnings growth is projected at 5.9%, while the same for Edison International is projected at 3.9%.

Dividend Yield

Utility companies generally distribute dividends. Currently, the dividend yield for AVANGRID is pegged at 3.9%, while Edison International’s dividend yield is 3.4%. Both stocks’ dividend yield is better than the industry average of 3.3%.

Debt to Capital

Debt to capital is a good indicator of the financial position of a company and shows how much debt is used to run the business. AGR and EIX have a debt-to-capital level of 29.4% and 61.5%, respectively, compared with the industry’s average debt-to-capital level of 58.2%.

Price Performance

In the past month, AVANGRID shares have risen 5.0% against the industry's decline of 3.2%. Meanwhile, shares of Edison International have risen 2.1% in the same period.

Zacks Investment Research
Image Source: Zacks Investment Research

Outcome

Although these companies are efficiently providing services for customers, AVANGRID, with its positive earnings surprise, efficient debt management, higher dividend yield and higher return over the past month, is a better stock to add to your portfolio.


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Edison International (EIX) - free report >>

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