Chicago, IL – May 15, 2025 – Today, Zacks Equity Research discusses Consolidated Edison Inc. ED, DTE Energy DTE, CenterPoint Energy Inc. CNP and Evergy EVRG.
Industry: Electric Utility
Link: https://www.zacks.com/commentary/2470565/4-utility-stocks-to-bet-on-from-the-thriving-electric-power-industry
The Zacks Utility – Electric Power industry players generate and supply electricity to millions of customers across the United States. Utilities are increasingly shifting toward clean fuel sources and prioritizing the reduction of carbon emissions, supported by government initiatives that facilitate the industry's move toward cleaner electricity generation.
In addition to focusing on sustainable energy, utilities are investing in strengthening the grid along with transmission and distribution infrastructure. Given the annual challenges posed by hurricane seasons, enhancing infrastructure year-round helps improve system resilience, minimize outages, and enable faster power restoration for customers impacted by storms.
Consolidated Edison Inc., with its systematic capital expenditure to upgrade infrastructure and maintain the reliability of its electric, gas and steam delivery systems, offers an excellent opportunity to stay invested in the utility space. Other utilities worth adding to your portfolio are DTE Energy, CenterPoint Energy Inc. and Evergy in this thriving industry.
The Utility - Electric Power utility industry encompasses the generation, transmission, distribution, storage, and sale of electricity to consumers. In general, demand for utility services remains stable across economic cycles, unless disrupted by unusual weather patterns. However, extreme temperatures — hot summers and cold winters — typically drive higher electricity consumption.
The industry is clearly undergoing a transformation, with an increasing number of companies committing to zero-emission targets. The global rise in Internet usage and the anticipated growth of artificial intelligence (AI) are expected to boost electricity demand, as AI-driven queries require much more power than standard Internet activities like streaming music or viewing photos. The drop in interest rates serves as a positive factor for this capital-intensive sector.
Interest Rate Decline is a Tailwind: To support maintenance, upgrades, and expansion, utilities frequently rely on capital markets for financing. A series of rate hikes by the Federal Reserve had pushed the benchmark interest rate to the 5.25-5.50% range, posing challenges for utility companies.
However, the Fed reversed its course, implementing rate cuts that lowered the benchmark rate by 100 basis points to a range of 4.25-4.50%. This shift is favorable for capital-intensive, domestically focused utilities, as reduced borrowing costs ease financial pressure.
The decline in interest rates is especially beneficial for utility providers planning significant investments in infrastructure improvements. More rate cuts are expected in 2025, which will be beneficial for the operators in the utility space.
Increasing Demand and Price for Electricity: Per the U.S. Energy Information Administration (EIA), to cater to the rising electricity demand in the United States, particularly from the commercial and industrial sectors, the electric power sector is projected to generate 2% more electricity in 2025 compared to 2024, an increase of approximately 100 billion kilowatt hours (kWh). This growth is expected to continue, with a further 1% increase anticipated in 2026.
The development of large data centers in the United States is also increasing the electricity demand, and Artificial Intelligence (AI) based data centers consume more power than traditional data centers. Per EIA, the price of average electricity consumed during 2025 summer will be about 4% more this summer (June, July, and August) compared with last summer. The rate hikes approved by the different commissions across the country will increase the overall price of the electricity consumed.
Transition Toward Cleaner Sources to Generate Power: The operators in the U.S. electric power sector are gradually moving toward cleaner sources of energy. Per the EIA, the annual share of U.S. electricity generation from renewable energy sources will rise from 23% in 2024 to 25% in 2025 and touch 27% in 2026 as a result of the continuing addition of solar and wind-generating capacity.
The passage of the Inflation Reduction Act should support and accelerate the utilities’ transition toward clean energy sources. It has removed the uncertainties relating to federal incentives provided for the use of renewable sources. The act entails an opportunity for a wide range of low-cost clean energy solutions in a predictable way for a long time and will create earnings visibility.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates upbeat near-term prospects. The 60-stock Utility-Electric Power industry is housed within the broader Zacks Utilities sector and currently carries a Zacks Industry Rank #64, which places it in the top 26% of more than 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate.
Before we present a few Utility - Electric Power stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and current valuation.
The Utility Electric Power industry has lagged the Zacks S&P 500 but outperformed its own sector over the past 12 months. The industry has gained 8.8% compared with its sector’s 6.3% rally. The Zacks S&P 500 composite has gained 10.7% in the same period.
On the basis of EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) TTM, which is a commonly used multiple for valuing Utility Electric Power companies, the industry is trading at 14.64X compared with the S&P 500’s 16.56X and the Utility sector’s 15.45X.
Over the past five years, the industry has traded as high as 21.22X, as low as 12.17X and at the median of 15.34X.
Utilities is a mature sector, and all the stocks selected from the Zacks Utility Electric Power industry have a market capitalization of more than $15 billion. All stocks currently have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
Consolidated Edison: New York-based Consolidated Edison, through its subsidiaries, is engaged in regulated electric, gas and steam delivery businesses. The company has outlined a strong capital expenditure plan totaling $38 billion for the 2025-2029 period. Looking further ahead, it intends to invest $68 billion over the next decade in major energy infrastructure projects. These investments are expected to enhance Consolidated Edison’s ability to deliver reliable, resilient, safe, and clean energy to its customers across New York.
ED’s current dividend yield is 3.3%, better than its industry’s yield of 3.1%. ED’s long-term (three to five years) earnings growth is pegged at 5.57%. The Zacks Consensus Estimate for Consolidated Edison’s 2025 and 2026 earnings per share has moved north by 0.2% and 0.9%, respectively, in the past 60 days.
DTE Energy: Detroit, MI-based DTE Energy Company, along with its subsidiaries, is engaged in regulated and unregulated energy businesses. DTE Energy aims to spend $24 billion during the 2025-2029 period to strengthen its electric and natural gas operations.
DTE’s long-term earnings growth is pegged at 7.6%. DTE’s dividend yield is 3.28%. The Zacks Consensus Estimate for DTE Energy’s 2025 and 2026 earnings per share reflects an increase of 0.28% and 0.13%, respectively, in the last 60 days.
CenterPoint Energy: Houston, TX-based CenterPoint Energy provides electric transmission & distribution, natural gas distribution and competitive natural gas sales and services operations. CenterPoint Energy is investing to expand its operations to meet increasing electricity demand, backed by expanding commercial activity. In the next 10 years, the company plans to invest $48.5 billion to strengthen and expand its operations further.
CNP’s current dividend yield is 2.4%. The company’s long-term earnings growth is pegged at 7.76%. The Zacks Consensus Estimate for CenterPoint Energy’s 2025 and 2026 earnings reflects year-over-year growth of 8% and 7.2%, respectively.
Evergy Inc.: Kansas City-based Evergy, along with its subsidiaries, generates and supplies electricity to customers. The company targets nearly $17.5 billion of expected base capital investments through 2029, including a new generation of around $6.17 billion, which is expected to be a renewable one.
EVRG’s long-term earnings growth is pegged at 5.7%. EVRG’s dividend yield is pegged at 4.09%. The Zacks Consensus Estimate for the company’s 2025 and 2026 earnings per share reflects year-over-year growth of 5.77% and 5.71%, respectively.
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DTE Energy Company (DTE) : Free Stock Analysis Report
Consolidated Edison Inc (ED) : Free Stock Analysis Report
CenterPoint Energy, Inc. (CNP) : Free Stock Analysis Report
Evergy Inc. (EVRG) : Free Stock Analysis Report
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