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PEG or ETR: Which Is a Better Utility Electric Power Stock?
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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 the transition to cost-effective, renewable energy sources to produce electricity aid the power industry.
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.
Except in the case of any major weather variation, demand for the services provided by utilities remains more or less steady, regardless of economic cycles. Per the U.S. Energy Information Administration (EIA) report, mild weather conditions during the first half of 2023 will likely result in a 2% decline in electricity usage, year over year. Thus, mild weather is expected to adversely impact utility earnings during second-quarter 2023.
The U.S. electric power sector is gradually moving toward cleaner sources of energy to produce electricity. Most of the companies have pledged to deliver 100% clean energy and achieve the zero-emission target in the coming years.
Per an EIA report, the annual share of U.S. electricity generation from renewable energy sources will rise 23% and 25% in 2023 and 2024, respectively.
In this blog, we run a comparative analysis on two Zacks Utility— Electric Power companies — Public Service Enterprise Group Incorporated (PEG - Free Report) and Entergy Corp. (ETR - Free Report) — to decide which one is a better pick for your portfolio.
Public Service Enterprise has a market capitalization of $31.3 billion, while Entergy has $20.9 billion.
Growth Projections
The Zacks Consensus Estimate for PEG’s 2023 earnings is pinned at $3.44 per share on revenues of $9.83 billion. This implies year-over-year bottom-line decrease of 0.9% and top-line growth of 0.3%.
The consensus mark for ETR’s 2023 earnings is pegged at $6.67 per share on revenues of $13.61 billion. This indicates year-over-year bottom-line growth of 3.9% and top-line decrease of 1.1%.
Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. The current ROE for Public Service Enterprise and Entergy is 12.8% and 10.3%, respectively, compared with the industry’s 4.9%.
Debt Position
The debt-to-capital ratio is a vital indicator of the financial position of a company. It shows the amount of debt used to run a business. Currently, Public Service Enterprise and Entergy have a debt-to-capital of 57.9% and 67%, respectively, compared with the industry’s 58.1%.
The times interest earned (TIE) ratio for PEG is 5.1, and that for ETR is 2. Since both the companies have a TIE ratio exceeding one, it indicates that they have enough financial flexibility to meet their near-term debt obligations.
Dividend Yield
Utility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for Public Service Enterprise is 3.64% and that for Entergy is 4.32%. The dividend yields of these companies are better than the Zacks S&P 500 Composite’s average of 1.4%.
Price Performance
In the past six months, shares of PEG have risen 4.4% against the industry's decline of 2.8%. Shares of ETR have declined 7.5% in the same time frame.
Image Source: Zacks Investment Research
Outcome
Both Public Service Enterprise and Entergy are evenly matched and good picks for your portfolio. They have the potential to improve further from their current position and serve the needs of their growing customer base. However, our choice at this moment is PEG, given its better ROE and debt position and better price performance than ETR.
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PEG or ETR: Which Is a Better Utility Electric Power Stock?
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 the transition to cost-effective, renewable energy sources to produce electricity aid the power industry.
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.
Except in the case of any major weather variation, demand for the services provided by utilities remains more or less steady, regardless of economic cycles. Per the U.S. Energy Information Administration (EIA) report, mild weather conditions during the first half of 2023 will likely result in a 2% decline in electricity usage, year over year. Thus, mild weather is expected to adversely impact utility earnings during second-quarter 2023.
The U.S. electric power sector is gradually moving toward cleaner sources of energy to produce electricity. Most of the companies have pledged to deliver 100% clean energy and achieve the zero-emission target in the coming years.
Per an EIA report, the annual share of U.S. electricity generation from renewable energy sources will rise 23% and 25% in 2023 and 2024, respectively.
In this blog, we run a comparative analysis on two Zacks Utility— Electric Power companies — Public Service Enterprise Group Incorporated (PEG - Free Report) and Entergy Corp. (ETR - Free Report) — to decide which one is a better pick for your portfolio.
Both the companies carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Public Service Enterprise has a market capitalization of $31.3 billion, while Entergy has $20.9 billion.
Growth Projections
The Zacks Consensus Estimate for PEG’s 2023 earnings is pinned at $3.44 per share on revenues of $9.83 billion. This implies year-over-year bottom-line decrease of 0.9% and top-line growth of 0.3%.
The consensus mark for ETR’s 2023 earnings is pegged at $6.67 per share on revenues of $13.61 billion. This indicates year-over-year bottom-line growth of 3.9% and top-line decrease of 1.1%.
Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. The current ROE for Public Service Enterprise and Entergy is 12.8% and 10.3%, respectively, compared with the industry’s 4.9%.
Debt Position
The debt-to-capital ratio is a vital indicator of the financial position of a company. It shows the amount of debt used to run a business. Currently, Public Service Enterprise and Entergy have a debt-to-capital of 57.9% and 67%, respectively, compared with the industry’s 58.1%.
The times interest earned (TIE) ratio for PEG is 5.1, and that for ETR is 2. Since both the companies have a TIE ratio exceeding one, it indicates that they have enough financial flexibility to meet their near-term debt obligations.
Dividend Yield
Utility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for Public Service Enterprise is 3.64% and that for Entergy is 4.32%. The dividend yields of these companies are better than the Zacks S&P 500 Composite’s average of 1.4%.
Price Performance
In the past six months, shares of PEG have risen 4.4% against the industry's decline of 2.8%. Shares of ETR have declined 7.5% in the same time frame.
Image Source: Zacks Investment Research
Outcome
Both Public Service Enterprise and Entergy are evenly matched and good picks for your portfolio. They have the potential to improve further from their current position and serve the needs of their growing customer base. However, our choice at this moment is PEG, given its better ROE and debt position and better price performance than ETR.