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Xcel Energy's (XEL) Capex & Clean Energy Efforts Bode Well

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Xcel Energy’s (XEL - Free Report) planned investments in enhancing its clean-energy generation capacity and infrastructure along with a consistent rise in its existing natural gas and electric customer base are its key catalysts.

In the past three months, shares of this currently Zacks Rank #3 (Hold) company have gained 8.6%, outperforming the industry’s rise of 6.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Three Months Price Performance

Zacks Investment ResearchImage Source: Zacks Investment Research

The Zacks Consensus Estimate for 2021 and 2022 earnings is pegged at $2.98 and $3.17 per share each, indicating respective growth of 6.81% and 6.38% from the corresponding year-ago reported figures. Additionally, the company’s long-term (three-five years) earnings growth rate stands at 6.11%.

Tailwinds

Xcel Energy continues to invest substantially in its utility assets and renewable projects to provide reliable services to its customers and effectively meet rising electricity demand. The company increased its investment plans to $24.3 billion from $23.5 billion in the 2021-2025 time period following the proposed wind and solar projects. Notably, the utility expects long-term earnings growth in the 5-7% range. Also, new rates and an expanding customer base are its major drivers.

The company is further 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 targets an 80% carbon-emission reduction by 2030 and 100% carbon-free electricity by 2050.

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

Notably, Xcel Energy’s liquidity level totaled $3,590 million as of Apr 26, which is sufficient to fulfill its near-term obligations.

Headwinds

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

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