Xcel Energy (XEL) to Gain From Investment & Renewable Expansion
Xcel Energy Inc.’s XEL strategic investments in infrastructure projects and focus on clean power generation will further boost its earnings performance. The company’s expanding customer base and rising demand act as tailwinds.
However, this Zacks Rank #3 (Hold) company has to face risks related to the failure of transmission and distribution lines.
Tailwinds
Xcel Energy aims to spend $34 billion during the 2024-2028 time frame, an increase of $4.5 billion from its previous capital expenditure plan. These investments are aimed at strengthening and expanding its transmission, distribution, electric generation and renewable projects. Xcel Energy expects to deliver long-term earnings per share (EPS) growth in the 5-7% range from a 2022 base of $3.15 per share.
Xcel Energy is focusing on clean-energy transition. After completing six wind projects with 1,500 megawatt (MW) capacities in 2020, the company completed four wind farms, adding another 800 MW of clean energy generation capacity to its portfolio. The company got key regulatory approval for the Minnesota resource plan, which includes the closing of coal plants like the A.S. King Plant by 2028 and Sherco 3 by 2030.
High quality and reliable services provided by the company attract new customers and allow Xcel Energy to serve an expanding electric and natural gas customer base. In the first nine months of 2023, the electric and natural gas customer base increased 1.1% and 1%, respectively. In the same time frame, sales volumes for the electric segment improved 1.1% and natural gas volumes increased 0.4% year over year.
Headwinds
Xcel Energy’s natural gas and electric transmission and distribution operations are exposed to several risks, including explosions, leaks and mechanical setbacks. These incidents can affect the company’s operations, thereby impacting its financial performance.
Xcel Energy’s operations are subject to commodity price fluctuations. Despite the existing fuel recovery mechanisms in most of its service territories, higher fuel costs could significantly impact the results of operations if expenses are not recovered.
Stocks to Consider
Some better-ranked stocks from the same industry are Consolidated Edison ED, NiSource Inc. NI, and Entergy Corp. ETR. Each stock presently carries a Zacks Rank #2 (Buy). 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 2%. The Zacks Consensus Estimate for ED’s 2023 EPS indicates an increase of 8.6% from the previous year’s level.
NiSource’s long-term earnings growth rate is 7.15%. The Zacks Consensus Estimate for NI’s 2023 EPS implies an improvement of 8.8% from that recorded in 2022.
Entergy’s long-term earnings growth rate is 6.43%. It delivered an average earnings surprise of 4.4% in the previous four quarters.
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Xcel Energy Inc. (XEL) : Free Stock Analysis Report
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