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D or NEE: Which Utility Stock to Keep in Your Portfolio?
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Since services provided by utilities are basic necessities of the society, we witness a steady demand for such services. Market for utility services is nonvolatile as electricity, gas and water fulfill basic needs. These companies are generally regulated, fundamentally strong and mature. Stable earnings and cash flow rewards through regular dividends to investors make these stocks attractive.
In this article, we run a comparative analysis on two prominent electric power utilities — Dominion Energy, Inc (D - Free Report) and NextEra Energy, Inc (NEE - Free Report) — to ascertain which one performed better and is a suitable investment option right now.
Earnings & Surprise Trend
Dominion Energy’s second-quarter 2018 operating earnings beat the Zacks Consensus Estimate by 10.26%. The company has surpassed the Zacks Consensus Estimate in all the trailing four trailing quarters, the average being 6.33%.
NextEra Energy’s second-quarter 2018 adjusted earnings beat the Zacks Consensus Estimate by 1.93%. The company has surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average being 3.01%.
Debt/Capital
Dominion Energy and NextEra Energy have higher debt/capital ratio than industry’s 50.28% and S&P 500 composite’s 41.69%. Dominion Energy has 61.58% debt/capital ratio while NextEra Energy has 43.94%.
Guidance
For third-quarter 2018, Dominion expects operating earnings between 95 cents to $1.15 per share compared with $1.04 in third-quarter 2017. Positive drivers include commercial operation of the Cove Point Liquefaction project and benefit from tax reform.
NextEra Energy reiterated adjusted earnings guidance in the range of $7.45-$7.95 for 2018. The company expects earnings to witness a compound annual growth rate (CAGR) of 6-8% per year through 2021, off its 2018 earnings midpoint of $7.70.
Estimates Movement
In the past 30 days, the Zacks Consensus Estimate for Dominion Energy’s 2018 earnings inched up 0.7% to $4.13 and year-over-year growth is pegged at 14.72%.
The Zacks Consensus Estimate for NextEra Energy’s 2018 earnings moved up by a penny to $7.74 in the past 30 days and year-over-year growth is pegged at 15.52%.
Zacks Rank
Dominion Energy carries a Zacks Rank #3 (Hold). The company has a market capitalization of around $45.93 billion.
NextEra Energy holds a Zacks Rank #3. It has a market capitalization of $81.48 billion.
Price Movement
Shares of NextEra Energy have gained 16.5% and shares of Dominion Energy have lost 9.6%, respectively, against the industry’s lossof 3.3% in the past 12 months.Price movement of NextEra Energy is better compared with the Dominion Energy's price movement.
How Utilities Are Shaping Up for Q3
Regular investment on infrastructure will allow Utilities' to maintain uninterrupted flow of service. Utilities are upgrading and strengthening existing infrastructure along with modernizing generation fleet. Monitoring and servicing on a day-to-day basis will heighten customers’ reliability and resiliency on the service providers.
Another undergoing aspect in the utility market specifically for electric utilities is transition. While replacing the primary fuel source, coal, companies are shifting focus toward renewables. Meanwhile, rising interest rates are making federal borrowings less profitable but more expensive for traders. Moreover, interest rates might rise twice in 2018 which is a major concern for utilities.
The Verdict
NextEra Energy and Dominion Energy are strong operators in the utility space and it is quite difficult to pick a clear winner, when analyzed in most of the parameters. The companies, holding a similar Zacks Rank, witnessed the Zacks Consensus Estimate for 2018 move up in the past 30 days.
However, NextEra Energy seems to have inched ahead, courtesy of lower debt-to-capital level and better year-over-year revision in earnings per share.
Despite a marginal difference between these high-quality utilities, our verdict tilts toward NextEra Energy.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
D or NEE: Which Utility Stock to Keep in Your Portfolio?
Since services provided by utilities are basic necessities of the society, we witness a steady demand for such services. Market for utility services is nonvolatile as electricity, gas and water fulfill basic needs. These companies are generally regulated, fundamentally strong and mature. Stable earnings and cash flow rewards through regular dividends to investors make these stocks attractive.
Currently, dividend yield of 3.25% from Zacks Utility - Electric Power industry is better than the S&P 500 composite’s 1.83%.
In this article, we run a comparative analysis on two prominent electric power utilities — Dominion Energy, Inc (D - Free Report) and NextEra Energy, Inc (NEE - Free Report) — to ascertain which one performed better and is a suitable investment option right now.
Earnings & Surprise Trend
Dominion Energy’s second-quarter 2018 operating earnings beat the Zacks Consensus Estimate by 10.26%. The company has surpassed the Zacks Consensus Estimate in all the trailing four trailing quarters, the average being 6.33%.
NextEra Energy’s second-quarter 2018 adjusted earnings beat the Zacks Consensus Estimate by 1.93%. The company has surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average being 3.01%.
Debt/Capital
Dominion Energy and NextEra Energy have higher debt/capital ratio than industry’s 50.28% and S&P 500 composite’s 41.69%. Dominion Energy has 61.58% debt/capital ratio while NextEra Energy has 43.94%.
Guidance
For third-quarter 2018, Dominion expects operating earnings between 95 cents to $1.15 per share compared with $1.04 in third-quarter 2017. Positive drivers include commercial operation of the Cove Point Liquefaction project and benefit from tax reform.
NextEra Energy reiterated adjusted earnings guidance in the range of $7.45-$7.95 for 2018. The company expects earnings to witness a compound annual growth rate (CAGR) of 6-8% per year through 2021, off its 2018 earnings midpoint of $7.70.
Estimates Movement
In the past 30 days, the Zacks Consensus Estimate for Dominion Energy’s 2018 earnings inched up 0.7% to $4.13 and year-over-year growth is pegged at 14.72%.
The Zacks Consensus Estimate for NextEra Energy’s 2018 earnings moved up by a penny to $7.74 in the past 30 days and year-over-year growth is pegged at 15.52%.
Zacks Rank
Dominion Energy carries a Zacks Rank #3 (Hold). The company has a market capitalization of around $45.93 billion.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NextEra Energy holds a Zacks Rank #3. It has a market capitalization of $81.48 billion.
Price Movement
Shares of NextEra Energy have gained 16.5% and shares of Dominion Energy have lost 9.6%, respectively, against the industry’s lossof 3.3% in the past 12 months.Price movement of NextEra Energy is better compared with the Dominion Energy's price movement.
How Utilities Are Shaping Up for Q3
Regular investment on infrastructure will allow Utilities' to maintain uninterrupted flow of service. Utilities are upgrading and strengthening existing infrastructure along with modernizing generation fleet. Monitoring and servicing on a day-to-day basis will heighten customers’ reliability and resiliency on the service providers.
Another undergoing aspect in the utility market specifically for electric utilities is transition. While replacing the primary fuel source, coal, companies are shifting focus toward renewables. Meanwhile, rising interest rates are making federal borrowings less profitable but more expensive for traders. Moreover, interest rates might rise twice in 2018 which is a major concern for utilities.
The Verdict
NextEra Energy and Dominion Energy are strong operators in the utility space and it is quite difficult to pick a clear winner, when analyzed in most of the parameters. The companies, holding a similar Zacks Rank, witnessed the Zacks Consensus Estimate for 2018 move up in the past 30 days.
However, NextEra Energy seems to have inched ahead, courtesy of lower debt-to-capital level and better year-over-year revision in earnings per share.
Despite a marginal difference between these high-quality utilities, our verdict tilts toward NextEra Energy.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>