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An unexpectedly sharp drop in temperatures seems to be the major reason for an increase in industrial production over the month of December. Extreme cold weather conditions, especially in the East and Midwest, have boosted demand for utilities substantially. Also, a rise in oil and natural gas output has led to an increase in mining production.
A pickup in demand for utilities has raised expectations that consumer expenditure increased during the fourth quarter. The Fed’s Beige Book Report has also indicated that the outlook for the current year remains bright. Given this backdrop investing in utilities stocks, which provide lucrative dividends, remains a smart option at this point.
Dip in Temperature Boosts Utilities Demand
Fresh predictions indicate that the blast of cold weather which has impaired refinery operations, closed poultry plants and resulted in a spike in energy prices could begin to recede by Friday. But as of now, large parts of the United States continue to suffer from extremely cold weather. Even as heaters are being pushed to their maximum, the price of natural gas has increased significantly.
Meanwhile, demand for electricity in Texas and other parts of the southern U.S. touched a record level during the winter heating season. According to Genscape data, early on Jan 17, average wholesale power hit the $2,267 a megawatt-hour mark for a short time. Power utilization surged to 65,731 megawatts in Texas during 7-8 am. This is a considerable increase over the previous record of 62,855 megawatts.
December’s Utilities, Mining Output Surges
As a result, industrial production increased by 0.9% in December, despite a mere 0.1% increase in manufacturing output. This is an important development, since the metric had declined by 0.1% in November. Most of December’s increase was attributable to a 5.6% increase in utilities output, which comes after a 3.1% decline in November. Also notable was a 1.6% increase in mining output following a surge in oil and gas extraction.
The rise in mining and utilities output compensated for a modest increase in factory output. The increase in manufacturing output, which makes up nearly 70% of the headline figure, came in at only 0.1% in December. However, readings for October and November were upwardly revised from 1.4% to 1.5% and from 0.2% to 0.3%, respectively.
Ultimately, the step up in demand for utilities raised expectations of a subsequent rise in consumer expenditure in the fourth quarter. This has led a section of economists to increase their growth estimates for the last quarter of 2017. For instance, Barclays (BCS) has raised its fourth quarter GDP forecast from 3% to 3.1%. The Fed’s Beige Book report also indicates that the economic outlook for 2018 remains encouraging.
Our Choices
A sharp drop in temperatures has led to a substantial increase in utilities demand over last month. This development, along with the strong retail sales reading for last month indicates that consumer spending likely remained strong in the fourth quarter.
Given the encouraging economic outlook for 2018, it is likely that utilities demand will continue to remain strong. This is why it may be a good idea to pick stocks from this sector. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.
MYR Group Inc. (MYRG - Free Report) , through its subsidiaries, provides electrical construction services in the United States and Canada.
MYR Group has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 5.6% over the last 30 days. The stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Consolidated Edison, Inc. (ED - Free Report) is a diversified utility holding company with subsidiaries engaged in both regulated and unregulated businesses.
Consolidated Edison has a Zacks Rank #2 (Buy). The company has expected earnings growth of 4.4% for the current year. The Zacks Consensus Estimate for the current year has improved by 0.3% over the last 30 days. The stock has a dividend yield of 3.5%.
CenterPoint Energy, Inc. (CNP - Free Report) is a domestic energy delivery company that provides electric transmission & distribution, natural gas distribution and competitive natural gas sales and services operations.
CenterPoint Energy has a Zacks Rank #2. The company has expected earnings growth of 9.2% for the current year The Zacks Consensus Estimate for the current year has improved by more than 1.2% over the last 30 days. The stock has a dividend yield of 3.9%.
Southwest Gas Holdings, Inc. (SWX - Free Report) is a purchases, distributor and transporter of natural gas across Nevada, California and Arizona.
Southwest Gas Holdings has a Zacks Rank #2. The company has expected earnings growth of 6.3% for the current year. The Zacks Consensus Estimate for the current year has improved by 0.7% over the last 30 days. The stock has a dividend yield of 2.6%.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Utilities Demand Boosts Industrial Production: 4 Terrific Picks
An unexpectedly sharp drop in temperatures seems to be the major reason for an increase in industrial production over the month of December. Extreme cold weather conditions, especially in the East and Midwest, have boosted demand for utilities substantially. Also, a rise in oil and natural gas output has led to an increase in mining production.
A pickup in demand for utilities has raised expectations that consumer expenditure increased during the fourth quarter. The Fed’s Beige Book Report has also indicated that the outlook for the current year remains bright. Given this backdrop investing in utilities stocks, which provide lucrative dividends, remains a smart option at this point.
Dip in Temperature Boosts Utilities Demand
Fresh predictions indicate that the blast of cold weather which has impaired refinery operations, closed poultry plants and resulted in a spike in energy prices could begin to recede by Friday. But as of now, large parts of the United States continue to suffer from extremely cold weather. Even as heaters are being pushed to their maximum, the price of natural gas has increased significantly.
Meanwhile, demand for electricity in Texas and other parts of the southern U.S. touched a record level during the winter heating season. According to Genscape data, early on Jan 17, average wholesale power hit the $2,267 a megawatt-hour mark for a short time. Power utilization surged to 65,731 megawatts in Texas during 7-8 am. This is a considerable increase over the previous record of 62,855 megawatts.
December’s Utilities, Mining Output Surges
As a result, industrial production increased by 0.9% in December, despite a mere 0.1% increase in manufacturing output. This is an important development, since the metric had declined by 0.1% in November. Most of December’s increase was attributable to a 5.6% increase in utilities output, which comes after a 3.1% decline in November. Also notable was a 1.6% increase in mining output following a surge in oil and gas extraction.
The rise in mining and utilities output compensated for a modest increase in factory output. The increase in manufacturing output, which makes up nearly 70% of the headline figure, came in at only 0.1% in December. However, readings for October and November were upwardly revised from 1.4% to 1.5% and from 0.2% to 0.3%, respectively.
Ultimately, the step up in demand for utilities raised expectations of a subsequent rise in consumer expenditure in the fourth quarter. This has led a section of economists to increase their growth estimates for the last quarter of 2017. For instance, Barclays (BCS) has raised its fourth quarter GDP forecast from 3% to 3.1%. The Fed’s Beige Book report also indicates that the economic outlook for 2018 remains encouraging.
Our Choices
A sharp drop in temperatures has led to a substantial increase in utilities demand over last month. This development, along with the strong retail sales reading for last month indicates that consumer spending likely remained strong in the fourth quarter.
Given the encouraging economic outlook for 2018, it is likely that utilities demand will continue to remain strong. This is why it may be a good idea to pick stocks from this sector. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.
MYR Group Inc. (MYRG - Free Report) , through its subsidiaries, provides electrical construction services in the United States and Canada.
MYR Group has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 5.6% over the last 30 days. The stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Consolidated Edison, Inc. (ED - Free Report) is a diversified utility holding company with subsidiaries engaged in both regulated and unregulated businesses.
Consolidated Edison has a Zacks Rank #2 (Buy). The company has expected earnings growth of 4.4% for the current year. The Zacks Consensus Estimate for the current year has improved by 0.3% over the last 30 days. The stock has a dividend yield of 3.5%.
CenterPoint Energy, Inc. (CNP - Free Report) is a domestic energy delivery company that provides electric transmission & distribution, natural gas distribution and competitive natural gas sales and services operations.
CenterPoint Energy has a Zacks Rank #2. The company has expected earnings growth of 9.2% for the current year The Zacks Consensus Estimate for the current year has improved by more than 1.2% over the last 30 days. The stock has a dividend yield of 3.9%.
Southwest Gas Holdings, Inc. (SWX - Free Report) is a purchases, distributor and transporter of natural gas across Nevada, California and Arizona.
Southwest Gas Holdings has a Zacks Rank #2. The company has expected earnings growth of 6.3% for the current year. The Zacks Consensus Estimate for the current year has improved by 0.7% over the last 30 days. The stock has a dividend yield of 2.6%.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2018 today >>