We recently updated a research report on Dominion Energy (D - Free Report) . Dominion’s long-term investment plans, focus to add more renewable assets, expand natural gas business and strong liquidity makes it a good option to hold during this unprecedented economic crisis.
Despite missing first-quarter earnings and revenue estimates, Dominion Energy reaffirmed its 2020 earnings guidance in the range of $4.25-$4.60 per share. The midpoint of the above guided range is $4.425, higher than the current Zacks Consensus Estimate for the period of $4.31.
Factors Acting as Tailwind
Dominion Energy plans to invest $26 billion in the 2019-2023 time period to strengthen its existing infrastructure. The company plans to invest $8 billion in 2020, out of which 70% will be invested in growth projects and rest for the maintenance of existing assets. Secured earnings from more than 95% regulated assets will continue to drive Dominion’s bottom-line growth. Strong utility fundamentals in its service territories, increase in customer volumes and revenue decoupling are likely to drive demand and performance of the company.
Dominion Energy, taking into consideration the expected rise in demand for natural gas, has started to build up natural gas distribution infrastructure. The company expects natural gas usage to increase in the range of 18-40% by 2050 from the 2015 levels. Hence, the expansion of natural gas infrastructure will allow it to reap the benefits of rising natural gas demand.
Long-term objective of the company is to add 21.3 GW of solar and wind (offshore and onshore) projects by 2036 and 2.7 GW of storage projects by 2035. Through the addition of clean assets in its electricity generation portfolio, the company aims at cutting down carbon emissions in its power generation by 55% in 2030 and further by 100% in 2050 from the 2005 levels. In addition, utilities like Duke Energy Corporation (DUK - Free Report) , Xcel Energy (XEL - Free Report) and NextEra Energy (NEE - Free Report) are investing considerably to lower carbon emissions, and add more renewable and clean sources to their generation portfolio.
Headwinds for the Company
Dominion Energy extended the expected completion time of the Atlantic Coast Pipeline to year-end 2021 (from mid-2020) and the cost estimate of the project is currently $8 billion and expects this pipeline to start operation in early 2022. The estimated cost and completion of the pipeline depends on Dominion being allowed to cut trees along the pipeline's route during the upcoming November 2020 to March 2021 season. If the company fails to get the necessary permission, the completion of the project will be delayed.
Dominion Energy had to issue 22 million shares for the acquisition of Dominion Energy Midstream Partners’ common units, such dilution is likely to have an adverse impact on earnings of the company.
Dominion Energy’s shares outperformed its industry’s growth in the past 12 months.
Dominion Energy currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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