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The Zacks Analyst Blog Highlights: Consolidated, Edison, Alliant Energy, OGE and Spire

Zacks Equity Research

For Immediate Release

Chicago, IL –February 22, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Consolidated Edison, Inc. ED, Edison International EIX, Alliant Energy Corp. LNT, OGE Energy Corp. OGE and Spire Inc. SR.

Here are highlights from Thursday’s Analyst Blog:

5 Utility Stocks to Gain from the Fed’s No-Rate-Hike Decision

Investors heaved a sigh of relief as most of the central bank officials favored to end the runoff of the Fed’s balance sheet this year. The Fed also expressed uncertainty over raising rates further in 2019, going by the minutes of its January meeting.

The Federal Open Market Committee’s (FOMC) Jan 29-30 meeting showed that almost all participants thought it would be ideal to stop reducing the Federal Reserve’s asset holdings later in 2019. The Fed’s dovish position on further rate hikes, by the way, makes it sensible to invest in dividend-yielding stocks such as utilities, which could thrive in a no-rate-hike scenario.

Interest Rates at Bay

A gauge of encouraging economic factors such as strengthening labor market conditions, a low unemployment rate, strong gross domestic product growth and inflation near the 2% target were taken into consideration by Fed officials as they expected sustained growth, the minutes revealed.

In addition, Federal Reserve Chairman Jerome Powell had stated on Jan 30 that the Fed would be patient when it came to altering its monetary policy. The Fed took into account economic headwinds that could be potential risks for the U.S. economy such as slowing growth in Europe and China, U.S.-China trade negotiations, the United Kingdom’s exit from the European Union and the five-week-long federal government shutdown. The Fed concluded that stagnating further rate hikes posed fewer risks to a strong economy.

The encouraging domestic economy and an uncertain global economic outlook are the major reasons behind the Fed’s decision to hold its gradual rate hikes.

Utilities Could Gain From Fed’s Dovish Stance

Utility companies could reap significant gains from the Federal Reserve’s decision to leave rates unchanged this year. This is because the borrowing costs of these companies will remain constant in the near future, thus helping them to avoid incurring additional costs on their expensive business models.

Second, utility companies offer products and services such as electricity, water, gas and HVAC (heating, ventilation and air conditioning) that are always in constant demand irrespective of stock market volatility or economic downturns. The consistent revenues of these companies stem from their stable business models and near-absolute authority in the regions where they operate.

Thus, the operational nature of these businesses allows them to maintain a decent level of dividends for their shareholders along with offering moderate risk levels. In addition, the Utilities Select Sector (XLU) has gained 13.8% on a year-over-year basis, making it the second sector that gained the most after real estate (14.2%). Therefore, betting on utility stocks could be ideal at present.

5 Stocks to Buy

We have selected five stocks from the utilities sector that could gain from Fed’s rate hike pause. All of these equities carry a Zacks Rank #2 (Buy).

Consolidated Edison, Inc. engages in the business of regulated energy, steam and gas delivery. The company mostly sells electricity to commercial, industrial, governmental and residential customers. Consolidated Edison’s Zacks Consensus Estimate for earnings rose 0.2% in the last 30 days. The company has a dividend yield of 3.8% against the Zacks Utility – Electric Power industry’s yield of 2.9%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Edison International generates, transmits and distributes electricity. Edison International’s Zacks Consensus Estimate for earnings rose 0.7% in the last 30 days. The company has a dividend yield of 4%.

Alliant Energy Corp. is a utility holding company that offers regulated natural gas and electricity services. Alliant Energy’s Zacks Consensus Estimate for earnings rose 0.9% in the last 30 days. The company has a dividend yield of 3.2%.

OGE Energy Corp. provides energy and energy-related services. The company has two segments of business, namely natural gas midstream operations and electric utility operations. OGE Energy’s Zacks Consensus Estimate for earnings rose 0.5% in the last 30 days. The company has a dividend yield of 3.5%.

Spire Inc. operates as a buyer, retail distributor and marketer of natural gas to industrial, commercial and residential users. The company has two segments of business, namely natural gas midstream operations and electric utility operations. Spire’s Zacks Consensus Estimate for earnings rose 0.8% in the last 30 days. The company has a dividend yield of 3.1% against the Zacks Utility – Gas Distribution industry’s yield of 2.8%.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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