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How the Top 4 Large Cap Utility Stocks Fared This Season?
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The domestic-focused matured Utility sector is a steady performer and continued its steady run in the second quarter of 2018 as well. The utility stocks gained from the new rates in their service territories, customer growth and effective management of expenses. Effective maintenance and additions to the existing infrastructure are increasing the resilience of the systems and helping the large utilities to serve its expanding customer base more efficiently.
The Utility sector's earnings in the second quarter were up 11.2% year over year on 1.0% revenue growth, reflecting stable performance of the utilities. Per our latest Earnings Preview report, overall second-quarter earnings for all the S&P 500 members are expected to be up 23.9% on 9.3% revenue growth.
Unemployment rate in the United States during the second quarter was in the range of 3.8-4.0%. This historic low level of unemployment boosted demand for new housing units and in turn the requirement for utility services. Per a U.S. Energy Information Administration ("EIA") report, electricity demand from residential, commercial and industrial sectors during the first half of 2018 improved from the year-ago period.
However, these utilities do have their share of challenges such as a rising debt level, stringent regulations and the hurricane season, all of which can wreak havoc on infrastructure. Rising interest rates (the Federal Reserve hiked interest rates in June, marking the seventh increase since December 2015) make bonds a strong investment option compared with utility investment.
Despite the challenges, let us focus on some large-cap utility stocks (market capitalization more than $40 billion) that continue to provide regular dividends to its shareholders. The stocks’ current dividend yield is better than the S&P 500 yield of 1.81%
Let us focus on four large-cap utilities and analyze their performance in the second quarter. All these stocks returned higher than their industry in the last three months.
Juno Beach, FL-based NextEra Energy Inc. is engaged in the generation, transmission, distribution and sale of electric energy. The company reported second-quarter 2018 adjusted earnings of $2.11 per share, beating the Zacks Consensus Estimate of $2.07 by 1.93%. The company’s average four-quarter positive earnings surprise is 3.01%.
The current dividend yield of the company is 2.6%. NextEra Energy has plans to invest nearly $40.0-$44.0 billion in different projects over the 2017-2020 period. The company’s earnings estimates for 2018 have moved up 0.13% to $7.74 per share in the past 30 days. The long-term earnings growth (3-5 yrs) of the company is projected to be 8.38%.
Atlanta, GA-based Southern Company (SO - Free Report) is one of the largest utilities in the United States. Southern Company serves approximately nine million customers through its eleven electric and natural gas distribution units in nine states. The company reported second-quarter 2018 adjusted earnings of 80 cents per share, beating the Zacks Consensus Estimate of 69 cents by 15.94%. The company’s average four-quarter positive earnings surprise is 8.82%.
The current dividend yield of the company is 5.2%. The company’s earnings estimates for 2018 have moved up 1.54% to $2.97 per share in the past 30 days. Its long-term earnings growth (3-5 yrs) is projected to be 4.50%.
Richmond, VA-based Dominion Energy Inc., together with its subsidiaries, produces and transports energy in the United States. The company reported second-quarter 2018 adjusted earnings of 86 cents per share, beating the Zacks Consensus Estimate of 78 cents by 10.3%. The company’s average four-quarter positive earnings surprise is 6.33%.
The current dividend yield of the company is 4.72%. The completed capital projects are expected to drive Dominion Energy’s earnings at 6-8% compound average growth rate from 2017 through 2020. The company’s earnings estimates for 2018 have moved up 1.17% to $4.13 per share in the past 30 days. Its long-term earnings growth (3-5 yrs) is projected to be 6.03%.
Chicago, IL-based Exelon Corporation is a utility services holding company that operates through its subsidiaries and has operations in 48 states, including the District of Columbia in the United States, along with Canada. The company reported second-quarter 2018 adjusted earnings of 71 cents per share, beating the Zacks Consensus Estimate of 61 cents by 16.39%. The company’s average four-quarter positive earnings surprise is 1.79%.
The current dividend yield of the company is 3.2%. It plans to invest nearly $21 billion over the 2018-2021 time frame in its regulated operations, in a bid to improve reliability of its operations. The company’s earnings estimates for 2018 have been revised upward by 0.49% to $3.09 per share in the past 30 days. Its long-term earnings growth (3-5 yrs) is projected to be 5.67%.
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How the Top 4 Large Cap Utility Stocks Fared This Season?
The domestic-focused matured Utility sector is a steady performer and continued its steady run in the second quarter of 2018 as well. The utility stocks gained from the new rates in their service territories, customer growth and effective management of expenses. Effective maintenance and additions to the existing infrastructure are increasing the resilience of the systems and helping the large utilities to serve its expanding customer base more efficiently.
The Utility sector's earnings in the second quarter were up 11.2% year over year on 1.0% revenue growth, reflecting stable performance of the utilities. Per our latest Earnings Preview report, overall second-quarter earnings for all the S&P 500 members are expected to be up 23.9% on 9.3% revenue growth.
Unemployment rate in the United States during the second quarter was in the range of 3.8-4.0%. This historic low level of unemployment boosted demand for new housing units and in turn the requirement for utility services. Per a U.S. Energy Information Administration ("EIA") report, electricity demand from residential, commercial and industrial sectors during the first half of 2018 improved from the year-ago period.
However, these utilities do have their share of challenges such as a rising debt level, stringent regulations and the hurricane season, all of which can wreak havoc on infrastructure. Rising interest rates (the Federal Reserve hiked interest rates in June, marking the seventh increase since December 2015) make bonds a strong investment option compared with utility investment.
Despite the challenges, let us focus on some large-cap utility stocks (market capitalization more than $40 billion) that continue to provide regular dividends to its shareholders. The stocks’ current dividend yield is better than the S&P 500 yield of 1.81%
Let us focus on four large-cap utilities and analyze their performance in the second quarter. All these stocks returned higher than their industry in the last three months.
NextEra Energy Inc. (NEE - Free Report)
Juno Beach, FL-based NextEra Energy Inc. is engaged in the generation, transmission, distribution and sale of electric energy. The company reported second-quarter 2018 adjusted earnings of $2.11 per share, beating the Zacks Consensus Estimate of $2.07 by 1.93%. The company’s average four-quarter positive earnings surprise is 3.01%.
The current dividend yield of the company is 2.6%. NextEra Energy has plans to invest nearly $40.0-$44.0 billion in different projects over the 2017-2020 period. The company’s earnings estimates for 2018 have moved up 0.13% to $7.74 per share in the past 30 days. The long-term earnings growth (3-5 yrs) of the company is projected to be 8.38%.
Southern Company (SO - Free Report)
Atlanta, GA-based Southern Company (SO - Free Report) is one of the largest utilities in the United States. Southern Company serves approximately nine million customers through its eleven electric and natural gas distribution units in nine states. The company reported second-quarter 2018 adjusted earnings of 80 cents per share, beating the Zacks Consensus Estimate of 69 cents by 15.94%. The company’s average four-quarter positive earnings surprise is 8.82%.
The current dividend yield of the company is 5.2%. The company’s earnings estimates for 2018 have moved up 1.54% to $2.97 per share in the past 30 days. Its long-term earnings growth (3-5 yrs) is projected to be 4.50%.
Dominion Energy (D - Free Report)
Richmond, VA-based Dominion Energy Inc., together with its subsidiaries, produces and transports energy in the United States. The company reported second-quarter 2018 adjusted earnings of 86 cents per share, beating the Zacks Consensus Estimate of 78 cents by 10.3%. The company’s average four-quarter positive earnings surprise is 6.33%.
The current dividend yield of the company is 4.72%. The completed capital projects are expected to drive Dominion Energy’s earnings at 6-8% compound average growth rate from 2017 through 2020. The company’s earnings estimates for 2018 have moved up 1.17% to $4.13 per share in the past 30 days. Its long-term earnings growth (3-5 yrs) is projected to be 6.03%.
Exelon Corporation (EXC - Free Report)
Chicago, IL-based Exelon Corporation is a utility services holding company that operates through its subsidiaries and has operations in 48 states, including the District of Columbia in the United States, along with Canada. The company reported second-quarter 2018 adjusted earnings of 71 cents per share, beating the Zacks Consensus Estimate of 61 cents by 16.39%. The company’s average four-quarter positive earnings surprise is 1.79%.
The current dividend yield of the company is 3.2%. It plans to invest nearly $21 billion over the 2018-2021 time frame in its regulated operations, in a bid to improve reliability of its operations. The company’s earnings estimates for 2018 have been revised upward by 0.49% to $3.09 per share in the past 30 days. Its long-term earnings growth (3-5 yrs) is projected to be 5.67%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>