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4 Reasons to Add Evergy (EVRG) to Your Portfolio Right Now

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Evergy Inc. EVRG, through its subsidiaries, provides clean, safe and reliable energy to 1.6 million customers in Kansas and Missouri.

This Zacks Rank #2 (Buy) firm is a promising bet at the moment, as it is focusing to produce more electricity from clean sources and cut down usage of coal in its generation portfolio.

Growth Projections

The Zacks Consensus Estimate for 2020 earnings is pegged at $3.12 on revenues of $5.17 billion. This implies 7.96% and 0.4% increase of the bottom line and the top line, respectively, from the year-ago reported figures.

The company’s long-term (three to five years) earnings growth rate is pegged at 6.4%.

Capital Expenditures

Evergy has plans to invest $7.5 billion in 2020-2024 time period, up by $1.5 billion from the capital expenditure planned for 2019-2023 period. The investments will be aimed at boosting transmission networks of the company and the addition of more renewable assets in its generation portfolio, thereby retiring and replacing fossil fuel plants that are nearing the end of their effective life.

Cost Management & Merger Savings

Ongoing cost-management initiatives are expected to further lower operating and maintenance (“O&M”) expenses of the company, and lead to a positive impact on margins. Evergy aims to lower its O&M expenses in the range of 5-8% in 2020 from 2019 levels.

Evergy expects net cumulative savings from mergers to touch $455 million between 2020 and 2022 and exceed 2019 target to save $110 million by 36%. The company continues to act to exceed its merger savings target.

Share Buybacks & Regular Dividend

In July 2018, Evergy’s board of directors authorized the repurchase of up to 60 million shares of its common stock or 22% of its outstanding shares. The repurchase authorization has no expiration date. It has already completed 75% of the 60-million share repurchase target.

The decline in outstanding shares will strengthen the value of its shareholders and stabilize the capital structure of the company, enabling it to meet the long-term earnings guidance.

Management targets dividend growth to be in line with earnings improvement and payout ratio within 60-70% in the long haul. The current dividend yield of the company is 2.76%, better than the Zacks S&P 500 composite’s average of 1.97%.

Price Performance

Shares of Evergy have outperformed its industry in the past 12 months.

Other Stocks to Consider

Some other top-ranked stocks from the same space worth considering are MDU Resources Group MDU, Duke Energy Corporation DUK and Chesapeake Utilities Corporation CPK, all having a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings (three to five years) growth rate for MDU Resources, Duke Energy and Chesapeake Utilities is pegged at 6%, 4.68% and 7% respectively.

The Zacks Consensus Estimate for 2020 earnings for MDU Resources, Duke Energy and Chesapeake Utilities has moved up by 2.94%, 1.15% and 2.04%, respectively, in the last 30 days.

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