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Xcel Energy (XEL) Strong on Capex and Clean Energy Plans

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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 six months, shares of this currently Zacks Rank #3 (Hold) company have lost 5.8% compared with the industry’s fall of 2.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Six Months’ Price Performance

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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 6.24% from the corresponding year-ago reported figures. Additionally, the company’s long-term (three-five years) earnings growth rate stands at 6.13%.

Tailwinds

Xcel Energy continues to invest substantially in its utility assets and renewable projects. This will not only increase the reliability of its services but also help it meet rising electricity demand effectively. The utility expects long-term earnings to grow in the 5-7% range on the back of new rates and an expanding customer base.

The company is focusing on transition to clean energy. In 2019, the utility's subsidiary NSP-Minnesota filed its Minnesota resource plan, which runs through 2034. It reached 51% carbon reduction in June 2021. Per this plan, it aims to achieve 85% carbon reduction and completely exit the usage of coal by 2030 as well as generate 100% carbon-free electricity by 2050.

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

Xcel Energy has liquidity worth $2,794 million as of Jul 26, which is sufficient to fulfill its near-term obligations.

Headwinds

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. It is subject to comprehensive environmental guidelines too, which could shoot up its operating costs.

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