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3 Alternative Energy Stocks to Watch As Wind Power Expands
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Increasing electricity generation from wind energy in the United States has been boosting the prospects of alternative energy stocks lately. Expanded offshore wind leasing in the United States is projected to lead to $120 billion in clean energy investments. This makes us optimistic about alternative energy companies. Also, growth trends observed in the electric vehicle market are expected to boost the prospects of U.S. renewable stocks. However, the United States still lags its Asian and European counterparts in terms of investments in the hydrogen market, despite its ample growth opportunities. The forerunners in the U.S. alternative energy industry are TotalEnergies (TTE - Free Report) , Evergy (EVRG - Free Report) and Brookfield Renewables (BEP - Free Report) .
About the Industry
The Zacks Alternative Energy industry can be fundamentally segregated into two sets of companies. While one group is involved in the generation and distribution of alternative energy and electricity from sources like wind, natural gas, biofuel, hydro and geothermal, the other set is engaged in the development, design and installation of renewable projects involving these alternative energy sources. The industry also includes a handful of stocks that offer fuel cell energy solutions, which have gained popularity as an affordable clean energy of late. Per a report by the U.S. Energy Information Administration, in 2021, renewable energy sources accounted for 20% of total electricity generation in the United States.
3 Trends Shaping the Future of the Alternative Energy Industry
Wind Energy – A Key Growth Catalyst: Among alternative energy sources, wind energy continues to make noticeable progress in the United States. Per EIA’s latest report, total annual U.S. electricity generation from wind energy increased from about 6 billion kilowatthours (kWh) in 2000 to about 380 billion kWh in 2021. Per American Clean Power Association’s (ACPA) report published in December 2021, expanded offshore wind leasing in the United States has the capacity to generate up to $4.5 billion in new federal revenues and lead to $120 billion in clean energy investments. This reflects the rapid growth pattern observed in the wind energy industry, which must have encouraged ACPA to make such a solid projection. Notably, a steadily decreasing input price along with an increasing flow of investments from all over the world has been instilling growth in the wind industry. The unsubsidized cost of energy for wind power has fallen 71% from 2009 to 2020. This reflects the solid opportunity that the U.S. wind market currently boasts, which, in turn, should boost the overall expansion of the alternative energy industry.
Lag in H2 Investment Demands Attention: Although hydrogen is playing the part of a major growth catalyst in the U.S. clean energy space these days, the nation lags China, Japan and European countries in terms of infrastructure and research investments in the green hydrogen space. Government and industry investment in hydrogen as an energy carrier adds up to $2 billion per year in Asia and the European Union, as stated by a report sponsored by major oil companies, automakers, hydrogen producers and fuel cell manufacturers that Greentech Media released in October 2020. However, the U.S. Department of Energy’s (DOE) Office of Fossil Energy and Carbon Management announced $28 million in federal funding for research and development and front-end engineering design projects that will advance clean hydrogen as a carbon-free fuel for transportation, industrial use and electricity production, in February 2022. This is much lower than the amount invested by its Asian and European counterparts. So, while there remains room for growth in the green hydrogen space for America, the government must expand its funding within the hydrogen market.
EV Market Boom to Boost Clean Energy: With enhanced environmental awareness, more and more individuals are choosing to switch from gasoline-powered vehicles to electric vehicles (EVs) each year, thereby boosting the market for EVs. In the United States, favorable government policies and support in terms of subsidies and grants, tax rebates and other non-financial benefits in the form of car pool lane access along with declining battery prices have been boosting the EV market. The U.S. EV market is expected to reach 6.9 million unit sales by 2025, reflecting a significant improvement from the 1.4 million unit sales forecast for 2020, as estimated by Frost & Sullivan’s analysis. Such an impressive outlook surely bolsters the growth prospect of clean energy stocks like Evergy, which offers the largest electric vehicle charging network in the United States.
Zacks Industry Rank Reflects Solid Outlook
The Zacks Alternative Energy industry is housed within the broader Zacks Oils-Energy sector. It carries a Zacks Industry Rank #90, which places it in the top 36% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is due to a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts have gained confidence in this group’s earnings growth potential over the past few months. The industry’s earnings estimate for the current fiscal year has gone up 34% to $4.89 since Dec 31.
Before we present a few alternative energy stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Beats S&P 500, Lags Sector
The Alternative Energy Industry has outperformed the Zacks S&P 500 composite but underperformed its sector over the past year. The stocks in this industry have collectively gained 11.5% while the Oils-Energy Sector has risen 31.3%. The Zacks S&P 500 composite has rallied 2.6% in the same timeframe.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month EV/EBITDA ratio, which is commonly used for valuing alternative energy stocks, the industry is currently trading at 2.55 compared with the S&P 500’s 14.07 and the sector’s 4.82.
Over the last five years, the industry has traded as high as 4.70X, as low as 2.45X, and at the median of 3.67X, as the charts show below.
EV-EBITDA Ratio (TTM)
3 Alternative Energy Stocks Worth Watching
TotalEnergies: Based in France, TotalEnergies is among the top five publicly traded global integrated oil and gas companies based on production volumes, proved reserves and market capitalization. Earlier this month, TotalEnergies and ENEOS Corporation announced a collaboration to jointly conduct a feasibility study to assess the production of Sustainable Aviation Fuel (SAF) in ENEOS Negishi Refinery in Yokohama city, Japan. The proposed unit, with a capacity of 300,000 tons per year of SAF, once operational will allow TTE to offer a sustainable supply chain of SAF in Japan around 2025.
The Zacks Consensus Estimate for TotalEnergies’ 2022 earnings has improved 31.8% in the past 60 days and implies an improvement of 58.7% from 2021’s reported earnings figure. The company delivered an average earnings surprise of 18.88% in the last four quarters. TotalEnergies currently sports a Zacks Rank #1 (Strong Buy).
Price & Consensus: TTE
Evergy: Based in Kansas City, MO, this company provides clean, safe and reliable energy to 1.6 million customers in Kansas and Missouri. In February 2022, Evergy announced its fourth-quarter and full-year 2021 results. Its 2021 adjusted earnings per share were $3.54, reflecting a 14% year-over-year increase and a 7% increase over the $3.30 mid-point of the company’s original 2021 adjusted EPS guidance range. This indicates the company’s operational strength.
The Zacks Consensus Estimate for Evergy’s 2022 earnings has improved 0.6% in the past 60 days. The company delivered an average earnings surprise of 87.44% in the last four quarters. It boasts a long-term earnings growth rate of 6.1%. Evergy currently carries a Zacks Rank #2 (Buy).
Price & Consensus: EVRG
Brookfield Renewables: Based in New York, Brookfield Renewables operates renewable power assets in the United States, Brazil and Colombia. In April 2022, Brookfield formed a strategic partnership with SSE Renewables for participation in the 1.4GW Hollandse Kust (west) offshore wind farm zone tenders, which are currently underway in the Netherlands. Such partnerships are favorable for expanding this stock’s footprint in the growing wind market.
The Zacks Consensus Estimate for BEP’s 2022 earnings has improved in the past 60 days while that for sales implies an improvement of 11.6% over 2021’s reported sales figure. Brookfield Renewables currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Price & Consensus: BEP
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3 Alternative Energy Stocks to Watch As Wind Power Expands
Increasing electricity generation from wind energy in the United States has been boosting the prospects of alternative energy stocks lately. Expanded offshore wind leasing in the United States is projected to lead to $120 billion in clean energy investments. This makes us optimistic about alternative energy companies. Also, growth trends observed in the electric vehicle market are expected to boost the prospects of U.S. renewable stocks. However, the United States still lags its Asian and European counterparts in terms of investments in the hydrogen market, despite its ample growth opportunities. The forerunners in the U.S. alternative energy industry are TotalEnergies (TTE - Free Report) , Evergy (EVRG - Free Report) and Brookfield Renewables (BEP - Free Report) .
About the Industry
The Zacks Alternative Energy industry can be fundamentally segregated into two sets of companies. While one group is involved in the generation and distribution of alternative energy and electricity from sources like wind, natural gas, biofuel, hydro and geothermal, the other set is engaged in the development, design and installation of renewable projects involving these alternative energy sources. The industry also includes a handful of stocks that offer fuel cell energy solutions, which have gained popularity as an affordable clean energy of late. Per a report by the U.S. Energy Information Administration, in 2021, renewable energy sources accounted for 20% of total electricity generation in the United States.
3 Trends Shaping the Future of the Alternative Energy Industry
Wind Energy – A Key Growth Catalyst: Among alternative energy sources, wind energy continues to make noticeable progress in the United States. Per EIA’s latest report, total annual U.S. electricity generation from wind energy increased from about 6 billion kilowatthours (kWh) in 2000 to about 380 billion kWh in 2021. Per American Clean Power Association’s (ACPA) report published in December 2021, expanded offshore wind leasing in the United States has the capacity to generate up to $4.5 billion in new federal revenues and lead to $120 billion in clean energy investments. This reflects the rapid growth pattern observed in the wind energy industry, which must have encouraged ACPA to make such a solid projection. Notably, a steadily decreasing input price along with an increasing flow of investments from all over the world has been instilling growth in the wind industry. The unsubsidized cost of energy for wind power has fallen 71% from 2009 to 2020. This reflects the solid opportunity that the U.S. wind market currently boasts, which, in turn, should boost the overall expansion of the alternative energy industry.
Lag in H2 Investment Demands Attention: Although hydrogen is playing the part of a major growth catalyst in the U.S. clean energy space these days, the nation lags China, Japan and European countries in terms of infrastructure and research investments in the green hydrogen space. Government and industry investment in hydrogen as an energy carrier adds up to $2 billion per year in Asia and the European Union, as stated by a report sponsored by major oil companies, automakers, hydrogen producers and fuel cell manufacturers that Greentech Media released in October 2020. However, the U.S. Department of Energy’s (DOE) Office of Fossil Energy and Carbon Management announced $28 million in federal funding for research and development and front-end engineering design projects that will advance clean hydrogen as a carbon-free fuel for transportation, industrial use and electricity production, in February 2022. This is much lower than the amount invested by its Asian and European counterparts. So, while there remains room for growth in the green hydrogen space for America, the government must expand its funding within the hydrogen market.
EV Market Boom to Boost Clean Energy: With enhanced environmental awareness, more and more individuals are choosing to switch from gasoline-powered vehicles to electric vehicles (EVs) each year, thereby boosting the market for EVs. In the United States, favorable government policies and support in terms of subsidies and grants, tax rebates and other non-financial benefits in the form of car pool lane access along with declining battery prices have been boosting the EV market. The U.S. EV market is expected to reach 6.9 million unit sales by 2025, reflecting a significant improvement from the 1.4 million unit sales forecast for 2020, as estimated by Frost & Sullivan’s analysis. Such an impressive outlook surely bolsters the growth prospect of clean energy stocks like Evergy, which offers the largest electric vehicle charging network in the United States.
Zacks Industry Rank Reflects Solid Outlook
The Zacks Alternative Energy industry is housed within the broader Zacks Oils-Energy sector. It carries a Zacks Industry Rank #90, which places it in the top 36% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is due to a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts have gained confidence in this group’s earnings growth potential over the past few months. The industry’s earnings estimate for the current fiscal year has gone up 34% to $4.89 since Dec 31.
Before we present a few alternative energy stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Beats S&P 500, Lags Sector
The Alternative Energy Industry has outperformed the Zacks S&P 500 composite but underperformed its sector over the past year. The stocks in this industry have collectively gained 11.5% while the Oils-Energy Sector has risen 31.3%. The Zacks S&P 500 composite has rallied 2.6% in the same timeframe.
One-Year Price Performance
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Industry's Current Valuation
On the basis of the trailing 12-month EV/EBITDA ratio, which is commonly used for valuing alternative energy stocks, the industry is currently trading at 2.55 compared with the S&P 500’s 14.07 and the sector’s 4.82.
Over the last five years, the industry has traded as high as 4.70X, as low as 2.45X, and at the median of 3.67X, as the charts show below.
EV-EBITDA Ratio (TTM)
3 Alternative Energy Stocks Worth Watching
TotalEnergies: Based in France, TotalEnergies is among the top five publicly traded global integrated oil and gas companies based on production volumes, proved reserves and market capitalization. Earlier this month, TotalEnergies and ENEOS Corporation announced a collaboration to jointly conduct a feasibility study to assess the production of Sustainable Aviation Fuel (SAF) in ENEOS Negishi Refinery in Yokohama city, Japan. The proposed unit, with a capacity of 300,000 tons per year of SAF, once operational will allow TTE to offer a sustainable supply chain of SAF in Japan around 2025.
The Zacks Consensus Estimate for TotalEnergies’ 2022 earnings has improved 31.8% in the past 60 days and implies an improvement of 58.7% from 2021’s reported earnings figure. The company delivered an average earnings surprise of 18.88% in the last four quarters. TotalEnergies currently sports a Zacks Rank #1 (Strong Buy).
Price & Consensus: TTE
Evergy: Based in Kansas City, MO, this company provides clean, safe and reliable energy to 1.6 million customers in Kansas and Missouri. In February 2022, Evergy announced its fourth-quarter and full-year 2021 results. Its 2021 adjusted earnings per share were $3.54, reflecting a 14% year-over-year increase and a 7% increase over the $3.30 mid-point of the company’s original 2021 adjusted EPS guidance range. This indicates the company’s operational strength.
The Zacks Consensus Estimate for Evergy’s 2022 earnings has improved 0.6% in the past 60 days. The company delivered an average earnings surprise of 87.44% in the last four quarters. It boasts a long-term earnings growth rate of 6.1%. Evergy currently carries a Zacks Rank #2 (Buy).
Price & Consensus: EVRG
Brookfield Renewables: Based in New York, Brookfield Renewables operates renewable power assets in the United States, Brazil and Colombia. In April 2022, Brookfield formed a strategic partnership with SSE Renewables for participation in the 1.4GW Hollandse Kust (west) offshore wind farm zone tenders, which are currently underway in the Netherlands. Such partnerships are favorable for expanding this stock’s footprint in the growing wind market.
The Zacks Consensus Estimate for BEP’s 2022 earnings has improved in the past 60 days while that for sales implies an improvement of 11.6% over 2021’s reported sales figure. Brookfield Renewables currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Price & Consensus: BEP