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Xcel Energy (XEL) Gains From Investment & Customer Growth

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Xcel Energy Inc. (XEL - Free Report) has been gaining from consistent investments to expand and upgrade infrastructure projects, a focus on renewable expansion and consistent customer base growth. These are expected to drive its performance over the long run.

Xcel Energy currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for 2022 earnings per share (EPS) of XEL has moved up 6.8% year over year. The company’s long-term (three to five years) earnings growth is currently pegged at 6.4%. Moreover, Xcel Energy’s current dividend yield of 2.6% is better than the Zacks S&P composite average of 1.54%. You can see the complete list of today’s Zacks #1Rank (Strong Buy) stocks here.

Tailwinds

Xcel Energy continues to invest substantially in its utility assets to provide reliable services for its customers and effectively meet the rising electricity demand. Xcel Energy aims to spend $26 billion during the 2022-2026 period, which includes the $1.5-$2.5 billion range in incremental opportunities. These investments are aimed at strengthening and expanding its transmission, distribution, electric generation and renewable projects.

Xcel Energy continues to expand its customer base. After recording an improvement of 1.2% and 1.1% in the electric and natural gas customer base year over year for 2021, the same increased by 1.1% and 1.1%, respectively, in the first quarter of 2022. Sales volumes and electric and natural gas volumes for the first quarter of 2022 improved by 3.9% and 1.5%, respectively, year over year.

Xcel Energy is focusing on a clean-energy transition. After completing six wind projects with 1,500 megawatt (MW) capacities in 2020, XEL completed four wind farms, adding another 800 MW of clean energy generation capacity to the portfolio. Addition of new clean energy projects in the generation portfolio will assist the company to achieve net-zero emission target set for 2050.

Headwinds

Xcel Energy’s dependence on the ability of its utility subsidiaries to recover the cost of providing energy and services is a concern as this could adversely impact profitability. Xcel Energy’s natural gas and electric transmission and distribution operations are exposed to explosions, leaks and mechanical setbacks. Business activities are susceptible to commodity price fluctuations and increasing interest rates, which can adversely impact demand and increase the borrowing cost. Further, Xcel Energy is subject to environmental guidelines too, which could flare up its operating costs.

Price Performance

In the past three months, shares of XEL have rallied 13.4% compared with the industry’s 6.5% rise.

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Stocks to Consider

Some better-ranked stocks from the same industry are Pampa Energia (PAM - Free Report) , Hawaiian Electric Industries (HE - Free Report) and Dominion Energy (D - Free Report) .

Pampa Energia currently sports a Zacks Rank #1. The long-term (three to five years) earnings growth is 33%. The Zacks Consensus Estimate for Pampa Energia’s 2023 EPS has moved up 44.9% year over year. PAM delivered an average earnings surprise of 72.9% in the last four quarters.

Hawaiian Electric Industries currently carries a Zacks Rank #2 (Buy). The long-term earnings growth is 3.2%. The Zacks Consensus Estimate for Hawaiian Electric’s 2023 EPS has moved up 4.6% year over year. HE delivered an average earnings surprise of 30.8% in the last four quarters.

Dominion Energy currently carries a Zacks Rank #2. The long-term earnings growth is 6.3%. The Zacks Consensus Estimate for Dominion Energy’s 2022 EPS has moved up 6.7% year over year. D delivered an average earnings surprise of 0.65% in the last four quarters.