We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
NI or NRG: Which Utility Electric Power Stock to Accumulate?
Read MoreHide Full Article
The Zacks Utility – Electric Power industry involves the generation, transmission, distribution, storage and sale of electricity to customers. A substantial portion of utilities’ earnings is generated from regulated operations. A clear transition is evident in this industry, with more companies declaring zero-emission goals. Research and development over the years have resulted in a substantial decline in the cost of setting up utility-scale renewable power projects, aiding in reducing emissions.
Per the U.S. Energy Information Administration, electricity demand in the United States can drop 1.3% year over year in 2023 but increase 1.7% in 2024. The decline in demand in 2023 was primarily due to milder temperatures in the first half of the year. Despite the expected reduction in usage, utilities will continue to benefit from the rise in residential electricity rates.
In order to maintain, upgrade and expand operations, utilities approach capital markets for loans. Utilities have been enjoying near-zero interest rates for the past few years. However, multiple rate hikes have pushed up interest rates. High interest rates are a concern for capital-intensive utilities in the United States as these will push up capital servicing costs substantially from the current levels.
In this article, we run a comparative analysis on two electric supply companies — NiSource Inc. (NI - Free Report) and NRG Energy (NRG - Free Report) — to decide which stock is worth retaining in your portfolio now.
NiSource has a market capitalization of $10.8 billion and the same for NRG Energy is $10.4 billion.
Growth Projections
The Zacks Consensus Estimate for NiSource’s 2023 earnings is pegged at $1.60, which indicates 8.84% year-over-year growth.
The Zacks Consensus Estimate for NRG Energy’s 2023 earnings is pinned at $4.54, suggesting 72.3% year-over-year growth.
Price Performance
In the past six months, NiSource’s shares have lost 3% compared with the industry's decline of 4.7%. Shares of NRG Energy have gained 37% in the same period.
Image Source: Zacks Investment Research
Debt-to-Capital
The 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. NiSource and NRG Energy have a debt-to-capital of 58.63% and 75.33%, respectively compared with the industry’s 54.71%. Even though both stocks are using more debt than the industry’s average, NiSource is using comparatively lower debt than NRG Energy.
Dividend Yield
Utility companies generally distribute dividends. Currently, the dividend yield for NiSource is pegged at 3.82%, while NRG Energy’s dividend yield is 3.29% and that of the industry is 3.65%.
Current Ratio
The current ratio measures a company's ability to pay short-term obligations or those due within a year. At present, the current ratio of NiSource is 0.41 and NRG Energy is 1.06. Since NRG Energy’s current ratio is more than 1 indicates, it has ample liquidity to meet near-term obligations.
Outcome
Even though both these companies are efficiently providing services to customers and should be accumulated in one’s portfolio, the above comparisons put NRG Energy ahead of NiSource.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
NI or NRG: Which Utility Electric Power Stock to Accumulate?
The Zacks Utility – Electric Power industry involves the generation, transmission, distribution, storage and sale of electricity to customers. A substantial portion of utilities’ earnings is generated from regulated operations. A clear transition is evident in this industry, with more companies declaring zero-emission goals. Research and development over the years have resulted in a substantial decline in the cost of setting up utility-scale renewable power projects, aiding in reducing emissions.
Per the U.S. Energy Information Administration, electricity demand in the United States can drop 1.3% year over year in 2023 but increase 1.7% in 2024. The decline in demand in 2023 was primarily due to milder temperatures in the first half of the year. Despite the expected reduction in usage, utilities will continue to benefit from the rise in residential electricity rates.
In order to maintain, upgrade and expand operations, utilities approach capital markets for loans. Utilities have been enjoying near-zero interest rates for the past few years. However, multiple rate hikes have pushed up interest rates. High interest rates are a concern for capital-intensive utilities in the United States as these will push up capital servicing costs substantially from the current levels.
In this article, we run a comparative analysis on two electric supply companies — NiSource Inc. (NI - Free Report) and NRG Energy (NRG - Free Report) — to decide which stock is worth retaining in your portfolio now.
Both stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
NiSource has a market capitalization of $10.8 billion and the same for NRG Energy is $10.4 billion.
Growth Projections
The Zacks Consensus Estimate for NiSource’s 2023 earnings is pegged at $1.60, which indicates 8.84% year-over-year growth.
The Zacks Consensus Estimate for NRG Energy’s 2023 earnings is pinned at $4.54, suggesting 72.3% year-over-year growth.
Price Performance
In the past six months, NiSource’s shares have lost 3% compared with the industry's decline of 4.7%. Shares of NRG Energy have gained 37% in the same period.
Image Source: Zacks Investment Research
Debt-to-Capital
The 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. NiSource and NRG Energy have a debt-to-capital of 58.63% and 75.33%, respectively compared with the industry’s 54.71%. Even though both stocks are using more debt than the industry’s average, NiSource is using comparatively lower debt than NRG Energy.
Dividend Yield
Utility companies generally distribute dividends. Currently, the dividend yield for NiSource is pegged at 3.82%, while NRG Energy’s dividend yield is 3.29% and that of the industry is 3.65%.
Current Ratio
The current ratio measures a company's ability to pay short-term obligations or those due within a year. At present, the current ratio of NiSource is 0.41 and NRG Energy is 1.06. Since NRG Energy’s current ratio is more than 1 indicates, it has ample liquidity to meet near-term obligations.
Outcome
Even though both these companies are efficiently providing services to customers and should be accumulated in one’s portfolio, the above comparisons put NRG Energy ahead of NiSource.