AVANGRID (AGR) Rides on Investments & Expanding Clean Portfolio
AVANGRID Inc.’s AGR strategic investments and ability to expand clean energy generation capacity increase its earnings potential. The company continues to increase shareholders’ value via dividend payment and buyback of shares.
However, this Zacks Rank #3 (Hold) company has to face certain headwinds, such as delay in the closure of PNM Resources’ deal and constraints related to new projects.
Tailwinds
AVANGRID is consistently expanding its clean energy generation capacity by adding more wind and solar sources to its portfolio. In April 2023, the company signed a Memorandum of Understanding with Navajo Tribal Utility Authority. The agreement aims at exploring opportunities to develop up to 1 Gigawatt (GW) of green energy projects within the Navajo Nation in the states of New Mexico and Arizona.
AGR plans to spend capital to maintain and upgrade its infrastructure and facilities. It invested a total of $2.7 billion in 2022, with nearly 71% in the Networks segment and the rest in Renewables. AVANGRID expects to invest $3 billion in 2023 to strengthen its operations.
The company increased the presence of sustainable energy in Texas, where it currently produces more than 1,250 MWs through six wind farms and has a pipeline of 1,300 MWs projects. In March 2023, AGR announced that it is going to use $30 million worth of high-quality solar trackers from Array Technologies (ATI) to develop a 321 Megawatt (MW) solar farm in Texas.
Headwinds
The delay in the proposed merger of PNM Resources with AVANGRID may adversely affect the latter’s benefits. It can result in additional pre-tax transaction costs and a loss in revenues associated with the uncertainty about the merger. On May 15, 2023, the appeal of the New Mexico Public Regulation Commission’s merger denial remained in the jurisdiction of the Court, which has scheduled oral arguments for Sep 12, 2023.
Stocks to Consider
Some better-ranked stocks from the same industry are Consolidated Edison Inc. ED, PPL Corporation PPL and Avista Corp. AVA, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ED’s long-term (three to five year) earnings growth rate is 2%. The Zacks Consensus Estimate for ED’s 2023 earnings per share (EPS) indicates an increase of 6.6% from that recorded in 2022.
PPL’s long-term earnings growth rate is 7.42%. The Zacks Consensus Estimate for PPL’s 2023 EPS implies growth of 12.8% from the previous year’s reported number.
AVA’s long-term earnings growth rate is 6.35%. The Zacks Consensus Estimate for AVA’s 2023 EPS indicates an improvement of 9.4% from that registered in 2022.
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