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Xcel Energy's Steady Investments in Utility Assets Bode Well

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Xcel Energy Inc.’s XEL disciplined investments in infrastructure projects, focus on renewable expansion and higher demand driven by improvement in economic condition will act as growth catalysts.

The Zacks Consensus Estimate for 2020 earnings is pegged at $2.79 per share, which reflects year-over-year growth of 5.68%. Additionally, long-term earnings growth of the company is pegged at 5.70%.

In the past 12 months, shares of the company have rallied 30.6% compared with the industry’s growth of 22.5%.


What’s Driving the Stock?

Xcel Energy continues to invest substantially in its utility assets to provide reliable services to customers and effectively meet rising electricity demand. The capital investment is directed toward transmission, distribution, electric generation and renewable projects. It expects to deliver 2020 earnings in the range of $2.73-$2.83 per share, which is in line with its long-term earnings growth objective in the range of 5-7%.

Xcel Energy targets a dividend payout ratio of 60-70% and aims to increase shareholders’ value by increasing dividend rate by 5-7% annually. In February 2020, the company increased quarterly dividend by 6.6%. Strong cash flow generation capacity of the company enables it to pay dividend and increase the same at regular intervals

Xcel Energy is focusing on clean energy transition.  In 2019, the Minnesota Commission approved the purchase of the Longroad wind assets. With the successful completion of wind projects named Foxtail, Lake Benton and Hale — which have 700 megawatt (MW) capacity — the company continued to achieve important milestones in nation-leading wind expansion program. Moreover, the company has almost 2,000 MWs of wind projects under construction, which are expected to be completed in 2020.

However, high debt levels, risk related to cyber security breaches and strict environmental legislations are concerns. In 2019, the company’s total interest charges and financing costs rose 13.5% from 2018.

Zacks Rank

The stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Few better-ranked stocks from the same sector are Atmos Energy Corp. (ATO - Free Report) , Sempra Energy SRE and Pacific Gas & Electric Co. PCG. All the three stocks hold a Zacks Rank #2 (Buy).

Long-term earnings growth of Atmos Energy, Sempra Energy and Pacific Gas & Electric is pegged at 7.20%, 8.10% and 2.50%, respectively.

Atmos Energy, Sempra Energy and Pacific Gas & Electric have trailing four-quarter positive earnings surprise of 1.91%, 3.21% and 17.53%, on average, respectively.

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