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The utilities sector is made up of companies that provide electricity, natural gas, water, sewage, and other services to homes and businesses. Many of these companies are heavily regulated. They include major utilities companies such as Dominion Energy Inc. (D), Duke Energy Corp. (DUK), and Xcel Energy Inc. (XEL). Last month, severe winter storms caused major power outages across Texas, and some residents ended up with skyrocketing electricity bills. The ramifications for electric utilities that serve Texas and the region remain unclear.
Utilities stocks, as represented by the Utilities Select Sector SPDR ETF (XLU), have significantly underperformed the broader market over the past year. The XLU has provided a total return of 30% over the past 12 months, less than half the Russell 1000’s total return of 66.1%, as of March 24. All statistics in the tables below are also as of March 24.
Here are the top 3 utilities stocks with the best value, the fastest growth, and the most momentum.
These are the utilities stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.
Source: YCharts
- Sempra Energy: Sempra is an energy services holding company that generates electricity, delivers natural gas, and operates natural gas pipelines. It also operates a wind power generation project. Its Q4 2020 income from continuing operations was essentially flat, up 0.7% year-over-year (YOY), despite a 7.7% increase in revenue.
- Vistra Corp.: Vistra operates an integrated retail and power generation business. It sells electricity and natural gas to residential, commercial and industrial customers, and also is involved in electricity generation, wholesale energy sales and purchases, and commodity risk management. Vistra, a major power provider in the state of Texas, said its finances will be severely affected by the February winter storms that caused temperatures to plunge far below average in the state, causing outages for millions of households. On February 26, Vistra management gave a preliminary estimate that the storms will have a one-time adverse impact of between $900 million and $1.3 billion. As result, management says that it currently cannot reaffirm its prior 2021 guidance.
- UGI Corp.: UGI is a domestic and international distributor of energy products and services. It offers propane, natural gas, and electricity. The company announced at the end of December that it agreed to acquire Mountaintop Energy Holdings LLC in a deal valued at $540 million, including the assumption of about $140 million in debt. Mountaintop Energy owns Mountaineer Gas Co., the largest gas local distribution company in West Virginia. The deal is expected to close in the second half of this year.
Fastest Growing Utilities Stocks
These are the top utilities stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year over year (YOY) percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.
Source: YCharts
- Essential Utilities Inc..: Essential Utilities is a regulated utility holding company that provides water, wastewater, and natural gas services to about 5 million customers in eastern, midwestern and southern states, including Pennsylvania, Ohio, Texas, Illinois, New Jersey, and Virginia under the Aqua and Peoples brands. Its Q4 2020 net income rose nearly 60% YOY. Revenue rose by 109.7%. Those sharp increases were due in part to Essential’s $4.3 billion acquisition in March, 2020 of The Peoples, a Pittsburgh-based natural gas distribution company. The Peoples’ acquisition accounted for virtually all of Essential’s revenue growth in Q4.
- Edison International.: Edison International is the parent holding company of SCE, a public utility that supplies and delivers electricity to customers in southern California. Another business, Edison Energy Group, provides services to commercial, institutional and industrial customers. Edison International’s Q4 2020 net income attributable to common shareholders nearly quadrupled to $526 million. A big chunk of the increase was due to items such as a gain on the sale of lease interests and other income. Revenue rose 6.3% YOY.
- American Electric Power Company Inc.: American Electric Power Company is a public utility holding company that provides service to customers in midwestern and southern U.S. states such as Indiana, Kentucky, Michigan, Ohio, and Texas.
These are the utilities stocks that had the highest total return over the last 12 months.
Source: YCharts
- The AES Corp.: AES is a utility company that operates a diversified portfolio of electricity generation and distribution businesses. Earlier this month, AES outlined key financial goals through 2025, including: extending its 7% to 9% annual growth target for in adjusted earnings per share and maintaining dividend increases of 4% to 6% per year.
- UGI Corp.: See company description above.
- CenterPoint Energy Inc.: CenterPoint Energy is a public utility holding company that owns and operates electric transmission and distribution, power generation, and natural gas distribution facilities. It serves more than 7 million customers in Arkansas, Indiana, Louisiana, Minnesota, Mississippi, Ohio, Oklahoma, and Texas.
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