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LNT or CNP: Which Is a Better Utility Power Stock to Pick?
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Utilities operating in the United States are taking measures to strengthen their infrastructure. These involve the process of generation, transmission, distribution, storage and the sale of electricity to customers.
Per the U.S. Energy Information Administration (“EIA”), the total electricity consumption, including sales to ultimate customers and the direct use of electricity by generators, will increase 2% in 2022 and 1% in 2023.
Utilities have been benefiting from various favorable factors, such as new electric rates, customer additions, cost management and the implementation of energy-efficiency programs. Also, the ongoing investments to improve the resiliency of electric infrastructure against extreme weather conditions and help in the transition to the cost-effective alternate sources of fuel to produce electricity aid the power industry.
However, the performance of capital-intensive domestic-focused utilities is likely to be adversely impacted by an increase in interest rates as capital servicing costs rise substantially from the current levels. An increase in borrowing costs and a resultant rise in interest expenses are likely to adversely impact the earnings of companies operating in this space.
Since December 2021, the Federal Reserve has revised interest rates upward four times, taking the benchmark rate to a range of 2.25%-2.5%, and has intentions to increase rates further in 2022.
The U.S. electric power sector is gradually moving toward cleaner sources of energy to produce electricity. 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. Meanwhile, the contribution of coal to electricity generation will fall from 23% in 2021 to 21% in 2022 and 20% in 2023.
Furthermore, the government is assisting in increasing the use of renewable energy through tax credits as well as helping operators achieve the long-term objective of carbon neutrality by 2050.
In this article, we run a comparative analysis on two Utility – Electric Power companies — Alliant Energy Corporation (LNT - Free Report) and CenterPoint Energy Inc. (CNP - Free Report) — to decide which stock is a better pick for your portfolio now.
The Zacks Consensus Estimate for Alliant Energy’s 2022 earnings has moved up by 1.8% in the past 60 days to $2.80 per share.
The Zacks Consensus Estimate for CenterPoint Energy’s 2022 earnings has moved up by 0.7% in the past 60 days to $1.39 per share.
LNT’s long-term (three to five years) earnings growth is projected at 6.2%, while the same for CNP is 3.9%.
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. Alliant Energy and CenterPoint Energy have a debt-to-capital level of 56.8% and 60%, respectively, compared with the industry’s average debt-to-capital level of 58.1%.
Dividend Yield
Utility companies generally distribute dividends. Currently, the dividend yield for Alliant Energy and CenterPoint Energy is 2.7% and 2.1%, respectively, compared with the Zacks S&P 500 composite’s average of 1.6%.
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 LNT and CNP is 11.6% and 10.9%, respectively. Both the stocks have outperformed the industry’s ROE of 10.4%.
Price Performance
In the past three months, Alliant Energy’s shares have rallied 14.1% compared with the industry's growth of 8.6%. Meanwhile, shares of CenterPoint Energy have rallied 19.9% in the same period. Both the stocks have outperformed the industry in the given period.
Image Source: Zacks Investment Research
Outcome
Although these companies are efficiently providing services for customers, Alliant Energy, with its higher long-term earnings growth, efficient debt management, higher dividend yield and superior ROE, is a better stock to add to your portfolio.
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LNT or CNP: Which Is a Better Utility Power Stock to Pick?
Utilities operating in the United States are taking measures to strengthen their infrastructure. These involve the process of generation, transmission, distribution, storage and the sale of electricity to customers.
Per the U.S. Energy Information Administration (“EIA”), the total electricity consumption, including sales to ultimate customers and the direct use of electricity by generators, will increase 2% in 2022 and 1% in 2023.
Utilities have been benefiting from various favorable factors, such as new electric rates, customer additions, cost management and the implementation of energy-efficiency programs. Also, the ongoing investments to improve the resiliency of electric infrastructure against extreme weather conditions and help in the transition to the cost-effective alternate sources of fuel to produce electricity aid the power industry.
However, the performance of capital-intensive domestic-focused utilities is likely to be adversely impacted by an increase in interest rates as capital servicing costs rise substantially from the current levels. An increase in borrowing costs and a resultant rise in interest expenses are likely to adversely impact the earnings of companies operating in this space.
Since December 2021, the Federal Reserve has revised interest rates upward four times, taking the benchmark rate to a range of 2.25%-2.5%, and has intentions to increase rates further in 2022.
The U.S. electric power sector is gradually moving toward cleaner sources of energy to produce electricity. 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. Meanwhile, the contribution of coal to electricity generation will fall from 23% in 2021 to 21% in 2022 and 20% in 2023.
Furthermore, the government is assisting in increasing the use of renewable energy through tax credits as well as helping operators achieve the long-term objective of carbon neutrality by 2050.
In this article, we run a comparative analysis on two Utility – Electric Power companies — Alliant Energy Corporation (LNT - Free Report) and CenterPoint Energy Inc. (CNP - 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.
Growth Projection
The Zacks Consensus Estimate for Alliant Energy’s 2022 earnings has moved up by 1.8% in the past 60 days to $2.80 per share.
The Zacks Consensus Estimate for CenterPoint Energy’s 2022 earnings has moved up by 0.7% in the past 60 days to $1.39 per share.
LNT’s long-term (three to five years) earnings growth is projected at 6.2%, while the same for CNP is 3.9%.
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. Alliant Energy and CenterPoint Energy have a debt-to-capital level of 56.8% and 60%, respectively, compared with the industry’s average debt-to-capital level of 58.1%.
Dividend Yield
Utility companies generally distribute dividends. Currently, the dividend yield for Alliant Energy and CenterPoint Energy is 2.7% and 2.1%, respectively, compared with the Zacks S&P 500 composite’s average of 1.6%.
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 LNT and CNP is 11.6% and 10.9%, respectively. Both the stocks have outperformed the industry’s ROE of 10.4%.
Price Performance
In the past three months, Alliant Energy’s shares have rallied 14.1% compared with the industry's growth of 8.6%. Meanwhile, shares of CenterPoint Energy have rallied 19.9% in the same period. Both the stocks have outperformed the industry in the given period.
Image Source: Zacks Investment Research
Outcome
Although these companies are efficiently providing services for customers, Alliant Energy, with its higher long-term earnings growth, efficient debt management, higher dividend yield and superior ROE, is a better stock to add to your portfolio.