|Bid||127.69 x 500|
|Ask||127.74 x 500|
|Day's Range||127.48 - 128.63|
|52 Week Range||119.51 - 142.50|
|PE Ratio (TTM)||N/A|
|Expense Ratio (net)||0.44%|
Currently, NRG Energy (NRG) is trading at an EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) valuation of ~12x—compared to its five-year historical average valuation of 11x. NRG Energy stock appears to be trading at a premium compared to its historical average.
Are Tax Cuts and Deregulation Boosting Industrial Production? The Federal Reserve publishes capacity utilization data along with industrial production data for US industries every month. Capacity utilization change is one of the few economic indicators that acts as a leading indicator for the economy and helps in predicting changes to the US business cycle.
NextEra Energy (NEE), the biggest utility by market capitalization in the country, reported its 1Q18 earnings on April 24. The company’s strong performance continued in 1Q18. NextEra Energy reported an adjusted EPS (earnings per share) of $1.94 for the reported quarter and beat consensus estimates. In the same quarter last year, NextEra Energy reported an EPS of $1.75.
Weekly Review: What Could Power On Utility Stocks? As we discussed previously, the ten-year Treasury yield has risen significantly this year and peaked at 3.0% last week, its highest level in the last four years. Rising interest rates are a double whammy for utility investors.
Dominion Energy (D) stock continues to look weak in the near future considering its moving averages. Currently, Dominion Energy is trading 6% lower than its 50-day moving average and 14% lower than its 200-day moving average. The large discount to both of the key moving averages highlights the weakness in the stock. Dominion Energy’s 50-day moving average around $70.6 is expected to act as a resistance for the stock in the near term. It’s currently trading at $66.1.
Dominion Energy’s (D) ongoing merger with SCANA (SCG) hit another roadblock recently. According to a Bloomberg report dated April 19, 2018, the South Carolina state senate voted to reduce the money SCANA can collect from the ratepayers for a now-abandoned nuclear power project. Dominion Energy had earlier warned it would call off the deal if it’s prevented from recovering nuclear project costs from ratepayers.
Utilities, the rate sensitives, stumbled in the last few months as the Fed hinted at a faster-than-expected interest rate hike pace in 2018. In the trailing 12 months, utilities at large (XLU) returned -0.5%, while broader markets returned more than 16% during the same period.
Currently, the Utilities Select Sector SPDR ETF (XLU), which tracks the S&P 500 Utilities Index, is trading marginally above its 50-day moving average and 5% lower than its 200-day moving average level. XLU’s 200-day moving average level around $52.7 will likely act as resistance for the ETF going forward. On April 13, 2018, XLU closed at $49.8.
There hasn’t been any respite for Dominion Energy (D) investors. The stock has corrected almost 20% YTD (year-to-date). Dominion Energy stock has severely underperformed broader utilities (XLU) (IDU). The company has been on a notable downtrend since the announcement about buying SCANA (SCG) early this year. In comparison, Duke Energy (DUK) and Southern Company (SO) have fallen almost 8% YTD.
FirstEnergy (FE) is heavily dependent on coal for its power generation. Almost 60% of its power comes from coal, while nuclear power accounts for 25% of its total generation. FirstEnergy declared late last month that it plans to close three nuclear power plants in Ohio and Pennsylvania, ~4,000 MW (megawatts) of its total capacity, by 2021 due to unprofitability.
AES Corporation (AES) is one of the smallest components of the S&P 500 Utilities Index (XLU). It’s currently trading at a dividend yield of 4.8%, which is higher than the industry average of 4.3%. AES stock has largely trended downward this year.
The February 2018 Industrial Production Report was released by the Federal Reserve on March 16, 2018. The report indicated that industrial production had increased by 1.1% in February compared to its 0.3% decline in January. This was the fifth month of rising industrial production in the United States in the last six months.
Let’s take a look at how utilities fared in terms of total returns in the last one year. The Utilities Select Sector SPDR ETF (XLU) returned more than 1%, while broader markets returned 18% in the last one year. Total returns consider stock appreciation as well as dividend payments in a particular period.
US utilities have witnessed severe headwinds in revenue growth due to increasing energy efficiency programs. California is the front-runner in the country in energy efficiency initiatives. The state aims to double its energy efficiency programs by 2030, which will likely dent utilities’ traditional electric operations.