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Investments and Regulated Assets Aid Alliant Energy (LNT)

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Alliant Energy’s (LNT - Free Report) investment in regulated natural gas and renewable energy assets, along with stable returns from regulated assets are going to drive its performance.

This Zacks Rank #3 (Hold) stock delivered an average earnings surprise of 18.3% in the last four quarters. The Zacks Consensus Estimate for 2020 and 2021 earnings per share indicates 5.2% and 6.4% year-over-year growth, respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Tailwinds

Alliant Energy announced plans to invest $6.6 billion over the 2020-2024 time period to strengthen the electric and gas distribution network, as well as add natural gas and renewable assets to the generation portfolio. A constructive regulatory environment will help the company to recover the capital expenditures. Courtesy of strong investment plans, its rate base is expected to expand to $13.9 billion in 2024 from $9.4 billion in 2019.

Alliant Energy’s earnings prospects look attractive due to ongoing additions to electric and natural gas customer volumes. Its geographic location and favorable regulatory developments bode well for the development of wind projects and long-term earnings growth. In addition, a diverse customer mix provides stability to sales as the company does not depend on a single group for revenues.

The regulated nature of Alliant Energy's operation provides strong earnings visibility and has enabled the company to increase the annual dividend rate for more than a decade. The company has paid out dividends since 1946 without fail. Nearly 99% earnings are generated from regulated operations, which provide an excellent visibility into its upcoming earnings. In the first nine months of 2020, the company paid dividend worth $281 million compared with $253 million in the year-ago period.

Headwinds

Increased competition from self-generation by large industrial customers, customer- and third party-owned generation (e.g. solar panels) as well as alternative energy sources can lower the demand for its services in Iowa and Wisconsin.

The company’s retail electric sales for the first nine months of 2020 were down 1.8% from the corresponding period last year, reflecting the COVID-19 pandemic’s impacts. The increase in residential load was not enough to offset the decline in demand from the commercial and industrial (C&I) group. Although electric demand from the C&I group marked an improvement, demand from the C&I group is yet to recover fully as the COVID-19 pandemic is still impacting overall demand.

Price Performance

In the past year, the stock has gained 3.7% compared with the industry’s rally of 0.2%.

Other Stocks to Consider

Other top-ranked stocks in the same space include PNM Resources (PNM - Free Report) , Portland General Electric Company (POR - Free Report) and Pinnacle West Capital (PNW - Free Report) , each currently holding a Zacks Rank #2 (Buy).

PNM Resources, Portland General Electric and Pinnacle West Capital delivered an average earnings surprise of 9.3%, 98.1% and 27.2% in the last four quarters, respectively.

The Zacks Consensus Estimate for 2020 earnings for PNM Resources, Portland General Electric, and Pinnacle West Capital has moved up 2.7%, 1.8%, and 7.5%, respectively, in the past 60 days.

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