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Xcel Energy (XEL) Rides on Investments, Targets Clean Energy

Zacks Equity Research
·3 min read

Xcel Energy’s XEL investments in enhancing its clean energy generation capability and the ongoing additions to its existing natural gas and electric customers are key catalysts. Also, continuous investments in infrastructure-related projects will benefit the utility in the future.

The Zacks Consensus Estimate for 2020 earnings is pegged at $2.77 per share, indicating growth of 4.92% from the year-ago reported figure. Additionally, the company’s long-term (three-five years) earnings growth rate stands at 5.81%.

Tailwinds

Xcel Energy continues to invest in its utility assets like transmission, distribution, electric generation and renewable projects for providing its customers with reliable services and effectively meet rising electricity demand. Notably, the utility expects long-term earnings growth in the range 5-7% range. Backed by proper operational management, the company anticipates its business and maintenance expenses to decline 4-5% in 2020, which in turn, will offset the negative impact of COVID-19.

It is also focusing on transition to clean energy. In 2019, the utility's subsidiary NSP-Minnesota filed its Minnesota resource plan, which runs through 2034. Per this plan, Xcel Energy will achieve 80% carbon-emission reduction by 2030 and 100% carbon-free electricity by 2050.

Other electric utilities are also adopting measures to supply clean and reliable energy to its customers. Some of the companies, namely Duke Energy DUK, DTE Energy DTE and Alliant Energy LNT are planning to provide absolute clean energy by 2050.

Moreover, the Mankato Energy Center’s divestiture and equity issue increased the company’s liquidity level to $4.5 billion. Such a solid cash position will be sufficient to meet its current debt obligations. The company’s strong cash flow generation capacity will enable it to raise its dividend at regular intervals.

Headwinds

However, Xcel Energy’s natural gas transmission and distribution operations are exposed to several risks including leaks and mechanical setbacks impacting normal operations. Also, the company’s business activities are susceptible to cyber security hazards, which might induce a loss of valuable data. Further, it is subject to comprehensive environmental guidelines, which could flare up operating costs.

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Xcel Energy Inc. (XEL) : Free Stock Analysis Report
 
DTE Energy Company (DTE) : Free Stock Analysis Report
 
Duke Energy Corporation (DUK) : Free Stock Analysis Report
 
Alliant Energy Corporation (LNT) : Free Stock Analysis Report
 
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