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Evergy (EVRG) Gains From Steady Investment in Infrastructure

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Evergy, Inc. (EVRG - Free Report) is expanding operations in the transmission market through collaborations and partnerships. The company’s systematic capital investments and focus on clean energy generation are likely to boost its performance.

However, this Zacks Rank #3 (Hold) company has to face risks related to rising interest rates and delay in the completion of capital projects.

Tailwinds

Evergy started expanding its existing operations through partnerships, acquisitions and collaborations. It has formed a joint venture with American Electric Power, named Transource Energy LLC, which will be focused on developing competitive transmission project. EVRG, with a 13.5% interest in the venture, is well-poised for sustainable and long-term growth in the transmission market.

The company plans to invest $11.6 billion in 2023-2027 and expects to witness a CAGR of 6-8% through 2025 from the 2021 base line. Out of this, $6.96 billion will be invested in transmission upgrades, distribution infrastructure and customer-facing platforms for enhanced reliability.

Evergy is also managing operating expenses efficiently. Our model predicts operating income growth for 2023-2025, owing to a decrease in total operating expenses. The company’s cost-saving initiatives will assist it in cutting operation and maintenance expenses by more than $346 million or 26.5% by 2025 from the 2018 reported levels.

Headwinds

EVRG has significant pending capital projects due to permit delays and inadequate availability or increased cost of equipment and materials, which are beyond the company’s control. This, in turn, is adversely impacting the profitability of Evergy.

The current spike in interest rates and the possibility of a further increase will lead to a rise in the project’s overall expenses.

Stocks to Consider

Some better-ranked stocks for investors interested in the same sector are Vaalco Energy (EGY - Free Report) , Cactus, Inc. (WHD - Free Report) , each currently carrying a Zacks Rank #2 (Buy), and Smart Sand (SND - Free Report) , sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Vaalco Energy, Cactus and Smart Sand’s 2023 earnings per share indicates increases of 46.98%, 34.24% and 1,450%, respectively.

In the last four quarters, Vaalco Energy, Cactus and Smart Sand delivered average earnings surprises of 80.7%, 10.9% and 147.3%, respectively.


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Evergy Inc. (EVRG) - free report >>

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