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3 Low-Beta Utility Stocks to Buy as Inflation Jumps to Three-Year High
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Key Takeaways
DUK offers 6.3% expected earnings growth, with estimates up 0.1% in the past 60 days.
ED combines diversified utility operations with 6.8% expected earnings growth.
PCG targets 10% earnings growth, with consensus estimates up 0.6% over 90 days.
Consumer price index accelerated further in May, as a surge in oil prices created pressure on the economy, raising concerns of an economic slowdown. Tensions in the Middle East have been contributing to the pain for consumers, with the Federal Reserve struggling to bring down inflation.
Given this scenario, we recommend buying three defensive stocks from the utility sector, namely Duke Energy Corporation (DUK - Free Report) , Consolidated Edison, Inc.(ED - Free Report) and PG&E Corporation (PCG - Free Report) .
The Consumer Price Index, an important gauge for measuring the prices of goods and services across the economy, jumped 0.5% sequentially in May after rising 0.6% in April, and 4.2% from the year-ago levels, the Commerce Department reported on Thursday. The annual jump was the largest since April 2023.
Although both the monthly and annual rises came in line with economists’ expectations, inflation has been rising at a steep pace over the past three months. CPI rose 3.3% year over year in March and 3.8% in April.
Core CPI, which strips out the volatile food and energy, rose 0.2% sequentially in May and 2.9% from the year-ago levels. The monthly gain was below the consensus estimate of a rise of 0.3%, while the annual figures came in line with expectations.
Inflation rose past the 4% mark for the first time in three years as oil prices surged amid the ongoing Middle East crisis. Hours after the CIP report was released, President Donald Trump suggested that a peace deal had been reached with Iran and that the war would stop.
However, concerns remain as an official announcement is yet to be made. Oil prices have surged nearly 40% since the beginning of the war, which has pushed inflation to a three-year high.
The Federal Reserve, which monitors the CPI to track its 2% target, halted rate cuts last year. Investors were earlier hoping that the central bank could resume its rate cuts in the second half of the year.
However, several Federal Reserve officials now believe that a rate hike would be necessary if inflation continues to stay above 2%. A rate hike means higher borrowing costs, which would further weigh on investors.
3 Low-Beta Utility Stocks with Growth Potential
Duke Energy Corporation
Duke Energy Corporation is a diversified energy company with a broad portfolio of domestic and international, natural gas and electric and regulated and unregulated businesses that supply, deliver and process energy in North America and selected international markets. DUK primarily operates through three business segments — Electric Utilities and Infrastructure, Gas Utilities and Infrastructure, and Commercial Renewables.
Duke Energy Corporation has an expected earnings growth rate of 6.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 60 days. Duke Energy has a beta of 0.39 and a current dividend yield of 3.41%.
Consolidated Edison
Consolidated Edison, Inc. is a diversified utility holding company with subsidiaries engaged in both regulated and unregulated businesses. ED’s regulated businesses operate through its subsidiaries — Consolidated Edison Company of New York, Orange and Rockland Utilities, Con Edison Clean Energy Businesses, Inc. and Con Edison Transmission, Inc.
Consolidated Edison has an expected earnings growth rate of 6.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. Consolidated Edison has a beta of 0.27 and a current dividend yield of 3.30%.
PG&E Corporation
PG&E Corporation is the parent holding company of California’s largest regulated electric and gas utility, Pacific Gas and Electric Company. PCG generates revenues mainly through the sale and delivery of electricity and natural gas to customers.
PG&E Corporation has an expected earnings growth rate of 10% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 90 days. PG&E Corporation has a beta of 0.27 and a current dividend yield of 1.20%.
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3 Low-Beta Utility Stocks to Buy as Inflation Jumps to Three-Year High
Key Takeaways
Consumer price index accelerated further in May, as a surge in oil prices created pressure on the economy, raising concerns of an economic slowdown. Tensions in the Middle East have been contributing to the pain for consumers, with the Federal Reserve struggling to bring down inflation.
Given this scenario, we recommend buying three defensive stocks from the utility sector, namely Duke Energy Corporation (DUK - Free Report) , Consolidated Edison, Inc.(ED - Free Report) and PG&E Corporation (PCG - Free Report) .
These stocks have seen positive earnings estimate revisions in the past 60 days, carry a Zacks Rank #2 (Buy) at present, and are set for solid returns. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Inflation Jump Further
The Consumer Price Index, an important gauge for measuring the prices of goods and services across the economy, jumped 0.5% sequentially in May after rising 0.6% in April, and 4.2% from the year-ago levels, the Commerce Department reported on Thursday. The annual jump was the largest since April 2023.
Although both the monthly and annual rises came in line with economists’ expectations, inflation has been rising at a steep pace over the past three months. CPI rose 3.3% year over year in March and 3.8% in April.
Core CPI, which strips out the volatile food and energy, rose 0.2% sequentially in May and 2.9% from the year-ago levels. The monthly gain was below the consensus estimate of a rise of 0.3%, while the annual figures came in line with expectations.
Inflation rose past the 4% mark for the first time in three years as oil prices surged amid the ongoing Middle East crisis. Hours after the CIP report was released, President Donald Trump suggested that a peace deal had been reached with Iran and that the war would stop.
However, concerns remain as an official announcement is yet to be made. Oil prices have surged nearly 40% since the beginning of the war, which has pushed inflation to a three-year high.
The Federal Reserve, which monitors the CPI to track its 2% target, halted rate cuts last year. Investors were earlier hoping that the central bank could resume its rate cuts in the second half of the year.
However, several Federal Reserve officials now believe that a rate hike would be necessary if inflation continues to stay above 2%. A rate hike means higher borrowing costs, which would further weigh on investors.
3 Low-Beta Utility Stocks with Growth Potential
Duke Energy Corporation
Duke Energy Corporation is a diversified energy company with a broad portfolio of domestic and international, natural gas and electric and regulated and unregulated businesses that supply, deliver and process energy in North America and selected international markets. DUK primarily operates through three business segments — Electric Utilities and Infrastructure, Gas Utilities and Infrastructure, and Commercial Renewables.
Duke Energy Corporation has an expected earnings growth rate of 6.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 60 days. Duke Energy has a beta of 0.39 and a current dividend yield of 3.41%.
Consolidated Edison
Consolidated Edison, Inc. is a diversified utility holding company with subsidiaries engaged in both regulated and unregulated businesses. ED’s regulated businesses operate through its subsidiaries — Consolidated Edison Company of New York, Orange and Rockland Utilities, Con Edison Clean Energy Businesses, Inc. and Con Edison Transmission, Inc.
Consolidated Edison has an expected earnings growth rate of 6.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. Consolidated Edison has a beta of 0.27 and a current dividend yield of 3.30%.
PG&E Corporation
PG&E Corporation is the parent holding company of California’s largest regulated electric and gas utility, Pacific Gas and Electric Company. PCG generates revenues mainly through the sale and delivery of electricity and natural gas to customers.
PG&E Corporation has an expected earnings growth rate of 10% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 90 days. PG&E Corporation has a beta of 0.27 and a current dividend yield of 1.20%.