In This Article:
Utilities 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 service providers generally enjoy consistent revenue growth and profitability. Due to their capacity to create cash flows and manage returns, utilities are able to enhance shareholder value via regular dividend payments.
Due to their capital-intensive nature, utilities need a steady stream of funding for new asset acquisitions and infrastructure improvements. The Fed has already reduced its fund rate by a cumulative 1 percentage point since September 2024. More interest rate cuts are expected in 2025. Due to the rate decline, capital-intensive utilities should have better prospects. This is because their capital servicing costs will decrease, increasing margins and profitability.
The U.S. electric power sector is gradually moving toward cleaner energy sources to produce electricity. Most of the companies have pledged to deliver 100% clean energy and achieve the zero-emission target in the coming years. The government is also assisting in increasing the use of renewable energy through tax credits. It also helps operators achieve the long-term objective of carbon neutrality by 2050.
Per a U.S. Energy Information Administration (“EIA”) report, the annual share of U.S. electricity generation from renewable energy sources will be 23% in 2024 and 25% in 2025. EIA also expects U.S. sales of 2% more electricity this winter than last year. The increase can be attributed to 3% more sales to residential customers because of colder weather than the previous year.
In this blog, we run a comparative analysis on two Zacks Utility — Electric Power companies — IDACORP IDA and Pinnacle West Capital Corporation PNW — to decide which one is a better pick for your portfolio.
Both companies carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
IDACORP has a market capitalization of $5.88 billion, while Pinnacle West Capital has $9.73 billion.
IDA & PNW’s Growth Projections & Surprise History
The Zacks Consensus Estimate for IDACORP’s 2024 earnings is pinned at $5.42 per share on revenues of $1.85 billion. This implies a year-over-year bottom-line increase of 5.5% and a top-line improvement of 4.5%.
The Zacks Consensus Estimate for Pinnacle West Capital’s 2024 earnings is pegged at $5.14 per share on revenues of $5.05 billion. This indicates year-over-year bottom and top-line growth of 16.6% and 7.6%, respectively.