Evergy (EVRG) to Gain From Clean Asset Additions, Acquisitions
Evergy Inc. EVRG continues to generate and provide reliable electricity services to more than a million customers in the United States. The company is focused on strengthening its infrastructure and expanding operations through acquisitions, partnership and joint ventures.
This Zacks Rank #3 (Hold) stock is exposed to rising interest rate risks and seasonal changes in demand for electricity.
Tailwinds
Evergy plans to invest $11.6 billion during 2023-2027 and expects annual earnings to witness a 6-8% CAGR through 2025 from the 2021 baseline. Out of this, $6.96 billion will be invested in upgrades to transmission and distribution infrastructure and customer-facing platforms to improve reliability.
Evergy — through the new Integrated Resource Plan — intends to achieve net-zero emissions by 2045. In 2022, Evergy reduced CO emissions by nearly half from 2005 levels and aims to lower emissions by shutting down fossil fuel-based plants and adding new units of clean power generation. In 2023, 62% of its production volumes will come from clean energy sources.
The company has already started to expand its existing operations through partnerships, systematic acquisitions and collaborations. Evergy is in a joint venture with American Electric Power to develop a competitive transmission project named Transource Energy, LLC. Evergy has a 13.5% interest in the venture, which further expands its operation in the transmission market.
EVRG decided to acquire the 199-megawatt (MW) Persimmon Creek Wind Farm for $250 million. This deal will support the company’s zero-emission goal.
Headwinds
The generation, distribution and transmission of electricity require expensive and complicated equipment. Despite maintenance, old equipment might fail, causing unplanned outages and service disruptions. This might force the company to purchase power from others at unpredictable and potentially higher costs to meet its sales obligations.
EVRG has significant capital projects that are pending. Projects could get delayed due to permit delays, inadequate availability or increased costs of equipment and materials, which are beyond its control, thereby increasing the cost of the projects and adversely impacting the profitability of the company.
Price Performance
In the past month the company's shares have dipped 0.7% against the industry's 0.1% growth.
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Key Picks
Some better-ranked utilities in the same industry are Consolidated Edison Inc. ED, Avista Corp. AVA and NiSource Inc. NI, 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.
Consolidated Edison’s long-term (three- to five-year) earnings growth rate is pegged at 2%. The Zacks Consensus Estimate for 2023 earnings per share indicates an increase of 6.6%.
Avista’s long-term earnings growth rate is pegged at 6.3%. The Zacks Consensus Estimate for 2023 earnings per share indicates a 9.4% growth.
NiSource’s long-term earnings growth rate is pegged at 6.9%. The Zacks Consensus Estimate for 2023 earnings per share indicates an increase of 6.8%.
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