Electric Utility Stocks in Focus Amid Coronavirus-Led Lockdown
As we mentally prepare ourselves to follow the social distancing guidelines for a longer period of time than previously expected, electricity producers and suppliers are silently playing their part to make our lives comfortable. President Trump has already said the federal guidance urging social distancing will stay in place through Apr 30.
COVID-19 continues to spread in the United States, with the total count of infected people currently being 142,735, out of which 2,489 have lost their lives.
Life Without Electricity is Unimaginable
With more and more people staying at home, domestic electricity consumption has increased. People are using their personal computers and laptops to work from home, which require electricity. Internet and cellular services are also powered by electricity, and not to mention the numerous household appliances that need electricity to run. Supply of potable water and removal of wastewater from millions of households also require electricity.
Moreover, hospitals wherein thousands of infected people are being treated need to have uninterrupted supply of electricity. Owing to social distancing, the demand for electricity from industry and commercial zones has dropped drastically but residential demand for the same has increased manifold.
Fight Against Coronavirus
Novel coronavirus has taken a heavy toll on the economy, with nearly 3.3 million people for the week ended Mar 21 filing a claim for jobless aid. The outbreak of coronavirus resulted in the shutdown of factories and other commercial activities in the United States, which is one of the major reasons behind the rising unemployment. To cope with such a situation that has never been experienced before, President Trump has signed the $2.2-trillion stimulus package into law.
Although the stimulus package does not have any direct benefit for utility service providers, the financial assistance provided to millions of unemployed and tax payers who are in lower-income bracket can make payment of utility dues within time. It is to be noted that utility operators depend on timely payment of dues. If the financial hardship results in non-payment of dues for months, it will surely impact the profitability of basic service suppliers.
Having said that, a few utilities like Duke Energy Corporation DUK, American Electric Power AEP, Dominion Energy D, Xcel Energy XEL, among others, have decided to continue providing services even in the event of non-payment of dues. Long-term earnings growth (three to five years) for all the companies is projected to be more than 4.5%.
Duke Energy and Xcel Energy have a Zacks Rank #2 (Buy), while Dominion Energy and American Electric Power have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price Performance
Year to date, shares of all the electric companies mentioned above in this report have outperformed the Zacks Utility sector.
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American Electric Power Company, Inc. (AEP) : Free Stock Analysis Report
Xcel Energy Inc. (XEL) : Free Stock Analysis Report
Dominion Energy Inc. (D) : Free Stock Analysis Report
Duke Energy Corporation (DUK) : Free Stock Analysis Report
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