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Xcel Energy's (XEL) CAPEX & Focus on Clean Energy Bode Well

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Xcel Energy’s (XEL - Free Report) disciplined investments in enhancing its clean-energy generation capability and infrastructure-related projects will boost its performance. Also, an increase in its existing natural gas and electric customers acts as a tailwind for the utility.

The Zacks Consensus Estimate for 2020 earnings is pegged at $2.78 per share, indicating growth of 5.30% from the year-ago reported figure. Additionally, the company’s long-term (three-five years) earnings growth rate stands at 6.11%.

Tailwinds

Xcel Energy continues to invest in its utility assets like transmission, distribution, electric generation and renewable projects for providing its customers with reliable services and effectively meet rising electricity demand.  The company aims to spend $22.6 billion in the next five years on the aforesaid initiatives. Notably, the utility expects long-term earnings growth in the 5-7% range. Also, new rates and expanding customer base are acting as catalysts.

The company is also focusing on transition to clean energy. In 2019, the utility's subsidiary NSP-Minnesota filed its Minnesota resource plan, which runs through 2034. Per this plan, Xcel Energy will achieve 80% carbon-emission reduction by 2030 and 100% carbon-free electricity by 2050.

Other electric utilities are also adopting measures to supply clean and reliable energy to their customers. Some of the companies, namely Duke Energy (DUK - Free Report) , DTE Energy (DTE - Free Report) and Alliant Energy (LNT - Free Report) are planning to provide absolute clean energy by 2050.

Notably, Xcel Energy’s liquidity level including Mankato Energy Center’s divestiture and debt issue totaled $3.5 billion. Such a solid cash position will be sufficient to meet its current debt obligations. Moreover, the company’s strong cash flow generation capacity will enable it to raise its dividend at regular intervals.

Headwinds

However, Xcel Energy’s natural gas transmission and distribution operations are exposed to several risks as in leaks and mechanical setbacks impacting its normal operations. Also, the company’s business activities are susceptible to cyber security hazards, which might induce a loss of valuable data. Further, it is subject to comprehensive environmental guidelines, which could flare up its operating costs.

Zacks Rank & Price Performance

In the past six months, shares of this currently Zacks Rank #3 (Hold) company have gained 2%, outperforming the industry’s rise of 1.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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