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NI or PPL: Which Is a Better Utility Electric Power Stock?
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Utilities continue to benefit from various favorable factors, such as new electric rates, customer additions, cost management and the implementation of energy-efficiency programs. Also, the ongoing investments to improve the resiliency of electric infrastructure against extreme weather conditions and the ongoing transition to cost-effective, renewable energy sources to produce electricity aid the power industry.
Utility companies operating in the United States are taking measures to further strengthen their infrastructure, including the process of generation, transmission, distribution, storage and sale of electricity to customers.
Still high interest rate is a matter of concern for the capital-intensive utilities. While the Fed has not increased the benchmark rate since July 2023, it expects to cut interest rates in September 2024. The probable drop in interest rates in 2024 would be a positive for utility operators planning to make large investments in infrastructure upgrades.
Except in the case of any major weather variation, the demand for the services provided by utilities remains more or less steady, regardless of economic cycles.
The U.S. electric power sector is gradually moving toward cleaner sources of energy to produce electricity. Per a U.S. Energy Information Administration report, the annual share of U.S. electricity generation from renewable energy sources will be 23% in 2024 and 25% in 2025.
In this blog, we run a comparative analysis on two Zacks Utility — Electric Power companies —NiSource (NI - Free Report) and PPL Corporation (PPL - Free Report) — to decide which one is a better pick for your portfolio.
NiSource has a market capitalization of $13.75 billion, while PPL has $21.19 billion.
Growth Projections
The Zacks Consensus Estimate for NiSource’s 2024 earnings is pegged at $1.72 per share on revenues of $5.6 billion. This indicates year-over-year bottom-line growth of 7.5% and a revenue increase of 1.7%.
The Zacks Consensus Estimate for PPL’s 2024 earnings is pinned at $1.71 per share on revenues of $8.77 billion. This implies year-over-year bottom-line growth of 6.9% and a revenue improvement of 5.5%.
Price Performance
In the past month, NiSource’s shares have risen 9.3% against the industry's decline of 0.1%. Shares of PPL have risen 2.4% in the same time frame.
Image Source: Zacks Investment Research
Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. The current ROE for NiSource and PPL is 9.56% and 8.8%, respectively, compared with the sector’s 9.53%.
Debt Position
The debt-to-capital ratio is a vital indicator of the financial position of a company. It shows the amount of debt used to run a business. Currently, NiSource and PPL have a debt-to-capital of 56.98% and 53.3%, respectively, compared with the industry’s 60.61%.
The times interest earned (TIE) ratio for NI is 2.7, and the same for PPL is 2.4. Since both companies have a TIE ratio exceeding one, it indicates that they have enough financial flexibility to meet their near-term debt obligations.
Liquidity
A current ratio of greater than one indicates that the company has enough short-term assets to liquidate to cover its short-term liabilities, if necessary. PPL’s current ratio is 1.28, better than the industry’s average of 0.85. NI’s current ratio is 0.66.
Dividend Yield
Utility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for NiSource is 3.46%, and the same for PPL is 3.59%. The dividend yields of these companies are better than the Zacks S&P 500 composite’s average of 1.25%.
Outcome
Both NiSource and PPL are evenly matched and good picks for your portfolio. They have the potential to improve further from their current position and serve the needs of their growing customer base. However, our choice at this moment is NI, given its better earnings growth, ROE, TIE ratio and better price performance than PPL.
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NI or PPL: Which Is a Better Utility Electric Power Stock?
Utilities continue to benefit from various favorable factors, such as new electric rates, customer additions, cost management and the implementation of energy-efficiency programs. Also, the ongoing investments to improve the resiliency of electric infrastructure against extreme weather conditions and the ongoing transition to cost-effective, renewable energy sources to produce electricity aid the power industry.
Utility companies operating in the United States are taking measures to further strengthen their infrastructure, including the process of generation, transmission, distribution, storage and sale of electricity to customers.
Still high interest rate is a matter of concern for the capital-intensive utilities. While the Fed has not increased the benchmark rate since July 2023, it expects to cut interest rates in September 2024. The probable drop in interest rates in 2024 would be a positive for utility operators planning to make large investments in infrastructure upgrades.
Except in the case of any major weather variation, the demand for the services provided by utilities remains more or less steady, regardless of economic cycles.
The U.S. electric power sector is gradually moving toward cleaner sources of energy to produce electricity. Per a U.S. Energy Information Administration report, the annual share of U.S. electricity generation from renewable energy sources will be 23% in 2024 and 25% in 2025.
In this blog, we run a comparative analysis on two Zacks Utility — Electric Power companies —NiSource (NI - Free Report) and PPL Corporation (PPL - Free Report) — to decide which one is a better pick for your portfolio.
Both the stocks carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NiSource has a market capitalization of $13.75 billion, while PPL has $21.19 billion.
Growth Projections
The Zacks Consensus Estimate for NiSource’s 2024 earnings is pegged at $1.72 per share on revenues of $5.6 billion. This indicates year-over-year bottom-line growth of 7.5% and a revenue increase of 1.7%.
The Zacks Consensus Estimate for PPL’s 2024 earnings is pinned at $1.71 per share on revenues of $8.77 billion. This implies year-over-year bottom-line growth of 6.9% and a revenue improvement of 5.5%.
Price Performance
In the past month, NiSource’s shares have risen 9.3% against the industry's decline of 0.1%. Shares of PPL have risen 2.4% in the same time frame.
Image Source: Zacks Investment Research
Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. The current ROE for NiSource and PPL is 9.56% and 8.8%, respectively, compared with the sector’s 9.53%.
Debt Position
The debt-to-capital ratio is a vital indicator of the financial position of a company. It shows the amount of debt used to run a business. Currently, NiSource and PPL have a debt-to-capital of 56.98% and 53.3%, respectively, compared with the industry’s 60.61%.
The times interest earned (TIE) ratio for NI is 2.7, and the same for PPL is 2.4. Since both companies have a TIE ratio exceeding one, it indicates that they have enough financial flexibility to meet their near-term debt obligations.
Liquidity
A current ratio of greater than one indicates that the company has enough short-term assets to liquidate to cover its short-term liabilities, if necessary. PPL’s current ratio is 1.28, better than the industry’s average of 0.85. NI’s current ratio is 0.66.
Dividend Yield
Utility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for NiSource is 3.46%, and the same for PPL is 3.59%. The dividend yields of these companies are better than the Zacks S&P 500 composite’s average of 1.25%.
Outcome
Both NiSource and PPL are evenly matched and good picks for your portfolio. They have the potential to improve further from their current position and serve the needs of their growing customer base. However, our choice at this moment is NI, given its better earnings growth, ROE, TIE ratio and better price performance than PPL.