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3 Utility Stocks to Track as Fed Delivers First Rate Hike Since 2023
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Key Takeaways
Exelon plans $41.7 billion in infrastructure investment over 2026-2029 as data-center demand rises.
PG&E plans $73 billion in 2026-2030 investments as data-center demand expands growth opportunities
Centuri's 2026 EPS estimate rose 4.62% in 60 days, while its times interest earned ratio stands at 1.4.
Federal Reserve chair Kevin Warsh formally announced the much-anticipated benchmark interest rate hike by 25 basis points, taking the funds rate to 3.75% to 4.00%. This is the first rate increase since 2023, and Warsh indicated another round of rate hikes before the end of 2026.
The Federal Open Market Committee voted 12-0 to raise the key interest rate. The decision reflected elevated inflation, the ongoing Middle East crisis and resulting rise in oil prices, a stable U.S. labor market and solid economic activity supported by resilient consumer spending.
Rate hikes can benefit sectors such as banking by supporting higher interest income. For the capital-intensive Zacks Utilities sector, however, higher borrowing costs can be a headwind because utilities rely heavily on external financing to fund infrastructure investments. Rising interest rates increase the sector’s cost of capital, which can pressure margins and potentially constrain utilities’ ability to maintain consistent dividend payouts.
Some utilities appear better positioned to withstand the impact of higher interest rates and continue generating relatively stable returns. Exelon Corporation (EXC - Free Report) , PG&E Corporation (PCG - Free Report) and Centuri Holdings, Inc. (CTRI - Free Report) , among others, currently carry a VGM Score of either A or B and a Zacks Rank of #3 (Hold).
More Rate Hikes on the Way?
The Fed policymakers strongly indicate another round of rate hikes before the end of the year. The rate hike will assist in lowering the inflation rate to near the target level of 2% and encourage more savings. The interest rate hike continues to assume a strong job market over the long term.
The policymakers sounded quite positive in their outlook for the U.S. economy. Quite naturally, the Fed expects to increase interest rates once more in 2026.
Selecting the Right Utilities
Utilities are traditionally averse to interest rate hikes. However, we have selected three utility stocks based on parameters so convincing that investors will think twice before ignoring them even after yesterday’s rate hike.
The qualifying criteria include a times interest earned ratio greater than 1, which means it has enough operating income to cover its current interest expenses and that the business is not in immediate danger of defaulting on its debt obligations. The stocks selected have shown improvement in earnings estimates in 2026.
Exelon Corporation is based in Chicago. It is focused solely on transmission and distribution operations and serves almost 11 million customers. Exelon continues to see rising high-density load interest across its service territories, led by data centers. To meet the rising demand, the company plans to expand infrastructure and plans to invest $41.7 billion over 2026-2029.
The times interest earned ratio of the company is currently pegged at 2.5; its beta is 0.3, and the Zacks Consensus Estimate for 2026 earnings per share has risen 0.35% in the past 60 days. The current dividend yield of the company is 3.98%. It carries a Zacks Rank #3 at present and has a VGM Score of B. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PG&E Corporation is based in Oakland, CA. The utility generates revenues mainly through the sale and delivery of electricity and natural gas to customers. Rising demand from data centers continues to expand the company’s growth opportunities. The utility plans to invest $12.4 billion in 2026 and $73 billion over the 2026-2030 period, while identifying at least $5 billion of additional customer-beneficial investment opportunities beyond its current capital plan.
The company’s times interest earned ratio is currently pegged at 1.9, and its beta is 0.24. The Zacks Consensus Estimate for 2026 earnings per share indicates year-over-year growth of 10%. The current dividend yield of the company is 1.52%. It currently has a Zacks Rank #3 and a VGM Score of B.
Centuri Holdings is based in Phoenix, AZ. Centuri provides utility and energy infrastructure services, with operations spanning grid modernization, distributed power, hyperscale data centers and renewable energy projects, including offshore wind and battery storage. The company plans to invest $75-$90 million in 2026 to support its utility and infrastructure operations.
The times interest earned ratio of the company is currently pegged at 1.4, and the Zacks Consensus Estimate for 2026 earnings per share has risen 4.62% in the past 60 days. It has a Zacks Rank #3 and a VGM Score of A.
View the Zacks #1 Rank List
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3 Utility Stocks to Track as Fed Delivers First Rate Hike Since 2023
Key Takeaways
Federal Reserve chair Kevin Warsh formally announced the much-anticipated benchmark interest rate hike by 25 basis points, taking the funds rate to 3.75% to 4.00%. This is the first rate increase since 2023, and Warsh indicated another round of rate hikes before the end of 2026.
The Federal Open Market Committee voted 12-0 to raise the key interest rate. The decision reflected elevated inflation, the ongoing Middle East crisis and resulting rise in oil prices, a stable U.S. labor market and solid economic activity supported by resilient consumer spending.
Rate hikes can benefit sectors such as banking by supporting higher interest income. For the capital-intensive Zacks Utilities sector, however, higher borrowing costs can be a headwind because utilities rely heavily on external financing to fund infrastructure investments. Rising interest rates increase the sector’s cost of capital, which can pressure margins and potentially constrain utilities’ ability to maintain consistent dividend payouts.
Some utilities appear better positioned to withstand the impact of higher interest rates and continue generating relatively stable returns. Exelon Corporation (EXC - Free Report) , PG&E Corporation (PCG - Free Report) and Centuri Holdings, Inc. (CTRI - Free Report) , among others, currently carry a VGM Score of either A or B and a Zacks Rank of #3 (Hold).
More Rate Hikes on the Way?
The Fed policymakers strongly indicate another round of rate hikes before the end of the year. The rate hike will assist in lowering the inflation rate to near the target level of 2% and encourage more savings. The interest rate hike continues to assume a strong job market over the long term.
The policymakers sounded quite positive in their outlook for the U.S. economy. Quite naturally, the Fed expects to increase interest rates once more in 2026.
Selecting the Right Utilities
Utilities are traditionally averse to interest rate hikes. However, we have selected three utility stocks based on parameters so convincing that investors will think twice before ignoring them even after yesterday’s rate hike.
The qualifying criteria include a times interest earned ratio greater than 1, which means it has enough operating income to cover its current interest expenses and that the business is not in immediate danger of defaulting on its debt obligations. The stocks selected have shown improvement in earnings estimates in 2026.
Exelon Corporation is based in Chicago. It is focused solely on transmission and distribution operations and serves almost 11 million customers. Exelon continues to see rising high-density load interest across its service territories, led by data centers. To meet the rising demand, the company plans to expand infrastructure and plans to invest $41.7 billion over 2026-2029.
The times interest earned ratio of the company is currently pegged at 2.5; its beta is 0.3, and the Zacks Consensus Estimate for 2026 earnings per share has risen 0.35% in the past 60 days. The current dividend yield of the company is 3.98%. It carries a Zacks Rank #3 at present and has a VGM Score of B. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PG&E Corporation is based in Oakland, CA. The utility generates revenues mainly through the sale and delivery of electricity and natural gas to customers. Rising demand from data centers continues to expand the company’s growth opportunities. The utility plans to invest $12.4 billion in 2026 and $73 billion over the 2026-2030 period, while identifying at least $5 billion of additional customer-beneficial investment opportunities beyond its current capital plan.
The company’s times interest earned ratio is currently pegged at 1.9, and its beta is 0.24. The Zacks Consensus Estimate for 2026 earnings per share indicates year-over-year growth of 10%. The current dividend yield of the company is 1.52%. It currently has a Zacks Rank #3 and a VGM Score of B.
Centuri Holdings is based in Phoenix, AZ. Centuri provides utility and energy infrastructure services, with operations spanning grid modernization, distributed power, hyperscale data centers and renewable energy projects, including offshore wind and battery storage. The company plans to invest $75-$90 million in 2026 to support its utility and infrastructure operations.
The times interest earned ratio of the company is currently pegged at 1.4, and the Zacks Consensus Estimate for 2026 earnings per share has risen 4.62% in the past 60 days. It has a Zacks Rank #3 and a VGM Score of A.