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AEE or ED: Which Is a Better Utility Power Stock to Buy Now?
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Utilities operating in the United States are taking measures to strengthen their power infrastructure, which involves the process of generation, transmission, distribution, storage and the sale of electricity to customers. Per the U.S. Energy Information Administration (EIA), electricity sales improved 2.1% in 2021 from the year-ago levels and the total electricity consumption is expected to improve 1.6% in 2022 and 1% in 2023.
A transition in the U.S. utility space is quite evident as more operators are voluntarily announcing long-term plans to become carbon neutral. Utilities are gradually moving away from coal and starting to focus on clean natural gas and renewable sources to generate electricity. Millions of dollars are being invested to generate electricity from clean sources and maintain and upgrade the existing electric infrastructure.
Per the EIA, the annual share of U.S. electricity generation from renewable energy sources will rise from 20% in 2021 to 22% in 2022 and 24% in 2023 due to the continuous addition in solar and wind-generating capacity. The government is helping to increase the usage of renewable energy through tax credits and operators are cutting down emissions on their own, intending to achieve carbon neutrality by 2050.
The ultimate goal of utilities is to make the system strong, resilient and reliable. Per the EIA, major utilities in the United States have been spending more on delivering electricity to customers and less on producing it. These upgrades will assist the network to perform better amid adverse weather conditions and ensure that end-users get a 24x7 supply of electricity and face minimum outages.
In this article, we run a comparative analysis on two Utility – Electric Power companies — Ameren Corporation (AEE - Free Report) and Consolidated Edison Inc. (ED - Free Report) — to decide which stock is a better pick for your portfolio now.
Ameren has a market capitalization of $24.4 billion, while the same for Consolidated Edison is $34 billion.
Growth Projections & Surprise History
The Zacks Consensus Estimate for Ameren’s 2022 earnings is pegged at $4.05 per share on revenues of $6.6 billion. The Zacks Consensus Estimate has moved up by 0.5% in the past 60 days.
The Zacks Consensus Estimate for Consolidated Edison’s 2022 earnings is pegged at $4.47 per share on revenues of $13.8 billion. The Zacks Consensus Estimate has moved up by 0.4% in the past 60 days.
Ameren delivered an average earnings surprise of 3.9% in the last four quarters, while the same for Consolidated Edison is 1.4%.
Price Performance
In the past six months, AEE shares have rallied 16.1% compared with the industry's growth of 14.2%. Meanwhile, shares of ED have rallied 31.6% in the same period.
Image Source: Zacks Investment Research
Investment Plans
Ameren projects a solid pipeline of regulated infrastructure investments of more than $45 billion in the 2022-2031 period. These investments are aimed at supporting overall system reliability, environmental compliance and electric and natural gas utility infrastructure improvements.
Through its capital expenditure plan of $15.7 billion for the 2022-2024 period, Consolidated Edison aims to add renewables, strengthen its infrastructure and enhance the reliability of operations. Consolidated Edison plans to invest $1.2 billion in clean energy projects during the 2022-2024 period.
Dividend Yield
Utility companies generally distribute dividends. Currently, the dividend yield for Ameren is pegged at 2.5%, while Consolidated Edison’s dividend yield is 3.3%. Hence, Consolidated Edison’s dividend yield is better than the industry average of 2.9%.
Debt to Capital
Debt to capital is a good indicator of the financial position of a company. The indicator shows how much debt is used to run the business. AEE and ED have a debt to capital of 57.1% and 53.1%, respectively, compared with the industry’s average debt-to-capital level of 56.5%.
Return on Equity
Return on Equity (ROE) is a measure of a company’s efficiency in utilizing shareholders’ funds. ROE for the trailing 12 months for Ameren and Consolidated Edison is 10.3% and 7.6%, respectively. Ameren has outperformed the industry’s ROE of 9.3%.
Outcome
Although these companies are efficiently providing services to customers, Consolidated Edison, with its efficient debt management, a higher dividend yield and a higher return over the past six months, is a better stock to add to your portfolio.
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AEE or ED: Which Is a Better Utility Power Stock to Buy Now?
Utilities operating in the United States are taking measures to strengthen their power infrastructure, which involves the process of generation, transmission, distribution, storage and the sale of electricity to customers. Per the U.S. Energy Information Administration (EIA), electricity sales improved 2.1% in 2021 from the year-ago levels and the total electricity consumption is expected to improve 1.6% in 2022 and 1% in 2023.
A transition in the U.S. utility space is quite evident as more operators are voluntarily announcing long-term plans to become carbon neutral. Utilities are gradually moving away from coal and starting to focus on clean natural gas and renewable sources to generate electricity. Millions of dollars are being invested to generate electricity from clean sources and maintain and upgrade the existing electric infrastructure.
Per the EIA, the annual share of U.S. electricity generation from renewable energy sources will rise from 20% in 2021 to 22% in 2022 and 24% in 2023 due to the continuous addition in solar and wind-generating capacity. The government is helping to increase the usage of renewable energy through tax credits and operators are cutting down emissions on their own, intending to achieve carbon neutrality by 2050.
The ultimate goal of utilities is to make the system strong, resilient and reliable. Per the EIA, major utilities in the United States have been spending more on delivering electricity to customers and less on producing it. These upgrades will assist the network to perform better amid adverse weather conditions and ensure that end-users get a 24x7 supply of electricity and face minimum outages.
In this article, we run a comparative analysis on two Utility – Electric Power companies — Ameren Corporation (AEE - Free Report) and Consolidated Edison Inc. (ED - Free Report) — to decide which stock is a better pick for your portfolio now.
Both the stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank(Strong Buy) stocks here.
Ameren has a market capitalization of $24.4 billion, while the same for Consolidated Edison is $34 billion.
Growth Projections & Surprise History
The Zacks Consensus Estimate for Ameren’s 2022 earnings is pegged at $4.05 per share on revenues of $6.6 billion. The Zacks Consensus Estimate has moved up by 0.5% in the past 60 days.
The Zacks Consensus Estimate for Consolidated Edison’s 2022 earnings is pegged at $4.47 per share on revenues of $13.8 billion. The Zacks Consensus Estimate has moved up by 0.4% in the past 60 days.
Ameren delivered an average earnings surprise of 3.9% in the last four quarters, while the same for Consolidated Edison is 1.4%.
Price Performance
In the past six months, AEE shares have rallied 16.1% compared with the industry's growth of 14.2%. Meanwhile, shares of ED have rallied 31.6% in the same period.
Image Source: Zacks Investment Research
Investment Plans
Ameren projects a solid pipeline of regulated infrastructure investments of more than $45 billion in the 2022-2031 period. These investments are aimed at supporting overall system reliability, environmental compliance and electric and natural gas utility infrastructure improvements.
Through its capital expenditure plan of $15.7 billion for the 2022-2024 period, Consolidated Edison aims to add renewables, strengthen its infrastructure and enhance the reliability of operations. Consolidated Edison plans to invest $1.2 billion in clean energy projects during the 2022-2024 period.
Dividend Yield
Utility companies generally distribute dividends. Currently, the dividend yield for Ameren is pegged at 2.5%, while Consolidated Edison’s dividend yield is 3.3%. Hence, Consolidated Edison’s dividend yield is better than the industry average of 2.9%.
Debt to Capital
Debt to capital is a good indicator of the financial position of a company. The indicator shows how much debt is used to run the business. AEE and ED have a debt to capital of 57.1% and 53.1%, respectively, compared with the industry’s average debt-to-capital level of 56.5%.
Return on Equity
Return on Equity (ROE) is a measure of a company’s efficiency in utilizing shareholders’ funds. ROE for the trailing 12 months for Ameren and Consolidated Edison is 10.3% and 7.6%, respectively. Ameren has outperformed the industry’s ROE of 9.3%.
Outcome
Although these companies are efficiently providing services to customers, Consolidated Edison, with its efficient debt management, a higher dividend yield and a higher return over the past six months, is a better stock to add to your portfolio.