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Xcel Energy (XEL) Gains From Investment & Customer Growth

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Xcel Energy Inc. (XEL - Free Report) has been gaining from consistent investments to expand and upgrade infrastructure. Xcel Energy’s focus on adding more renewable assets to its generation portfolio and expanding customer base are expected to drive its performance over the long run.

Xcel Energy currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2022 earnings per share (EPS) of XEL has moved up 7.1% year over year. The company’s long-term (three to five years) earnings growth is currently pegged at 6.4%. Moreover, Xcel Energy’s current dividend yield of 2.5% is better than the Zacks S&P composite average of 1.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Tailwinds

Xcel Energy continues to invest substantially in its utility assets to provide reliable services for its customers and effectively meet the rising electricity demand. It aims to spend $26 billion during the 2022-2026 period, which includes the $1.5-$2.5 billion range in incremental opportunities. These investments are aimed at strengthening and expanding its transmission, distribution, electric generation and renewable projects.

Xcel Energy continues to expand its customer base. After recording an improvement of 1.1% and 1.1% in the electric and natural gas customer base in the first quarter of 2022, the same increased by 1% and 1.1%, respectively, in the second quarter of 2022. Sales volumes and electric and natural gas volumes for the second quarter of 2022 improved by 3.1% and 1.2%, respectively, year over year.

Xcel Energy is focusing on a clean energy transition. After completing six wind projects with 1,500-megawatt (MW) capacities in 2020, XEL completed four wind farms, adding another 800 MW of clean energy generation capacity to the portfolio. The addition of new clean energy projects to the generation portfolio will assist the company in achieving the net-zero emission target set for 2050.

Headwinds

Xcel Energy’s dependence on the ability of its utility subsidiaries to recover the cost of providing energy and services is a concern as this could adversely impact profitability. Xcel Energy’s natural gas and electric transmission and distribution operations are exposed to explosions, leaks and mechanical setbacks. Business activities are susceptible to commodity price fluctuations and increasing interest rates, which can adversely impact demand and increase the borrowing cost. Further, Xcel Energy is subject to environmental guidelines, which could flare up its operating costs.

Price Performance

In the past six months, shares of XEL have rallied 16.6% compared with the industry’s 14.9% rise.

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Other Stocks to Consider

Some other similar-ranked stocks from the same industry are American Electric Power (AEP - Free Report) , ALLETE Inc. (ALE - Free Report) and Alliant Energy (LNT - Free Report) .

The Zacks Consensus Estimate for 2022 EPS of American Electric Power, ALLETE and Alliant Energy has moved up 6.3%, 15.5% and 6.5%, respectively, year over year.

The long-term earnings growth of American Electric Power, ALLETE and Alliant Energy is projected at 6.2%, 8.7% and 6.2%, respectively.

In the past six months, AEP, ALE and LNT shares have surged 21.9%, 3.7% and 12.3%, respectively.

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