|Bid||0.00 x 1200|
|Ask||0.00 x 1300|
|Day's Range||136.62 - 137.71|
|52 Week Range||119.51 - 142.50|
|PE Ratio (TTM)||N/A|
|Expense Ratio (net)||0.43%|
According to the latest 13F filing, Goldman Sachs and UBS Financial Services increased their stakes in the Utilities Select Sector SPDR ETF (XLU) in the second quarter. Goldman Sachs added net ~16 million units of XLU and held ~22% of its total outstanding shares as of June 30. In the first quarter, it held 11.5% of XLU’s total outstanding shares with ~16 million shares. UBS Financial Services bought net 8.7 million units of XLU and held 8.6% at the end of Q2 2018.
In the second quarter, the Vanguard Group was the largest institutional investor in the country’s biggest regulated utility, Duke Energy (DUK). The Vanguard Group raised its stake by ~0.8 million shares in the North Carolina–based utility, which was the second-largest utility by market cap. On June 30, it held 52.9 million shares of DUK stock, which was a 7.4% stake in the utility.
The Vanguard Group is the largest institutional investor in renewables titan NextEra Energy (NEE). It added net ~0.7 million shares of NEE to its existing holdings in the second quarter.
Utilities are one of the most vulnerable sectors to rising interest rates. Utilities have been on a notable uptrend in the last few weeks. In fact, utilities (IDU) gained momentum after the Fed delivered a rate hike in June. Currently, the Utilities Select Sector SPDR ETF (XLU) is trading 3% above its 50-day and 200-day moving average levels. The premium against both of these support levels indicates strength in XLU. The moving average level around $51.5 will likely act as a support for XLU in the short term. XLU closed at $53.0 on August 10.
Last week, Jamie Dimon, JPMorgan Chase’s chairman and CEO, said that investors should be prepared to deal with ten-year Treasury yields reaching 5% or higher, according to CNBC. Currently, Dimon expects the yields at 4% due to the strengthening economy.
Southern Company (SO) stock tumbled 4.5% after the utility reported its second-quarter earnings on August 8. The utility reported EPS of -$0.15 for the second quarter compared to EPS of -$1.38 in the comparable quarter last year. After the earnings report, Southern Company stock lost all of its gains this year with a steep one-day fall.
PPL (PPL) stock has shown a decent uptrend in the last few weeks—particularly after the Fed’s second rate hike in June. Since then, PPL has risen more than 10%, while broader utilities (XLU) (IDU) have risen ~8%. Let’s see where PPL might go from here in the short term.
Southern Company (SO) reported its second-quarter financial results today. The company reported EPS of -$0.15 for the second quarter compared to its EPS of -$1.38 in the comparable quarter last year. Southern Company’s power plants continued to strain its financials in the quarter. Adjusted for these charges, Southern Company saw EPS of $0.80 in the second quarter compared to EPS of $0.73 in the second quarter of 2017, displaying a healthy YoY (year-over-year) rise of ~10%. SO opened on a weak note on August 8, and it fell ~4% during early trading.
The consensus EPS estimate for the reported quarter was $0.54. In the United Kingdom, PPL’s Regulated segment’s adjusted EPS increased $0.05 mainly due to higher power prices, higher foreign exchange rates, and increased sales volumes. PPL’s total operating expenses increased to $1.19 billion for the reported quarter—an increase from $1.07 billion in the second quarter of 2017.
PPL (PPL) reported its second-quarter financial results on August 7. The company reported total revenues of $1.85 billion for the quarter ending on June 30—an increase of 7% YoY (year-over-year). Analysts expected revenues of $1.75 billion for the second quarter.
Dominion Energy (D) released its second-quarter results yesterday. It reported adjusted EPS of $0.86, beating analysts’ estimate and marking a 28% rise YoY (year-over-year) from $0.67. The company has reaffirmed its 2018 EPS guidance of $3.80–$4.25, and aims to grow its earnings 6%–8% per year through 2020, more than utilities (XLU) (IDU) on average. Dominion stock fell ~2% yesterday after the better-than-expected release, to close at $70.32.
PPL Corporation (PPL) is scheduled to report its second-quarter financial results on August 7. The quarter ended on June 30. According to analysts’ consensus, PPL is expected to report earnings of $0.54 per share compared to $0.52 per share in Q2 2017.
NRG Energy (NRG), which saw the largest stock rally among utilities last year, reported its second-quarter financial results today. It reported EPS of $0.31, missing analysts’ estimate and marking a YoY (year-over-year) fall from $0.36. The company’s adjusted EBITDA rose 23% YoY to $843 million from $686 million.
Duke Energy (DUK), the second largest utility by market cap, reported its second-quarter earnings results on August 2. It reported adjusted EPS of $0.93 in the quarter, missing analysts’ consensus estimate. In the same quarter last year, Duke Energy reported EPS of $1.01.
Southern Company (SO) is scheduled to release its second-quarter financial results on August 8. According to analysts’ estimates, Southern Company is expected to report total revenues of $5.30 billion for the quarter ending on June 30. In the second quarter of 2017, Southern Company reported revenues of $5.43 billion.
FirstEnergy (FE) reported its second-quarter financial results on July 31 after the markets closed. The company reported an adjusted EPS of $0.62 for the quarter ending on June 30. The earnings increased in the second quarter mainly due to favorable weather. A higher regulated commodity margin and new rates that came into effect during the quarter also helped FirstEnergy’s second-quarter earnings.
Pacific Gas and Electric Company (or PG&E) (PCG) stock is currently trading close to its early 2018 levels, marginally underperforming the broader utilities (XLU) (IDU). It’s currently trading 5% above its 50-day moving average and 2% below its 200-day moving average. Its 50-day moving average of $42.50 is likely to act as a support for the stock in the near future. PCG stock closed at $44.70 on July 26.
AES Corporation (AES) is one of the most rallied stocks among the S&P 500 utilities this year. It has soared more than 23% year-to-date, significantly outperforming the broader utilities (XLU) (IDU). Let’s see how it’s placed in the short term.
FirstEnergy (FE), a utility under transformation, is scheduled to report its second-quarter financial results on August 1. According to Wall Street analysts’ estimates, it will report earnings of $0.52 per share. That compares to $0.61 per share in Q2 2017. Management has given an earnings guidance of $0.47–$0.57 per share for the second quarter.
American Electric Power Company’s (AEP) target dividend growth of ~5% per year might not be an issue, considering its fair earnings growth for the next few years. AEP is one of the biggest utility holding companies in the country, with highly geographically diverse operations. It gets more than two-thirds of its total earnings from regulated operations, while the rest comes from competitive operations.
Dominion Energy (D), the fourth-largest utility company in the country by market cap, will release its second-quarter financial results on August 1. Dominion Energy’s ongoing SCANA (SCG) acquisition received approval from the Federal Energy Regulatory Commission on July 13. Dominion Energy stock has taken a hit since the deal’s announcement early this year.
Duke Energy (DUK), the second-largest utility by market capitalization, is scheduled to report its second-quarter financial results on August 2. According to analysts’ estimates, Duke Energy will report total revenues of $5.6 billion for the quarter ending on June 30. In the same quarter last year, the company reported revenues of $5.6 billion.
Xcel Energy (XEL), one of the largest regulated utilities in the country, is scheduled to report its second-quarter results on July 26. Analysts expect it to report EPS of $0.47. In 2Q 2017, it reported EPS of $0.45.
Trade war fears have fueled utilities’ rally in the last few weeks. The Utilities Select Sector SPDR ETF (XLU) has risen more than 5% in the last month, outperforming broader markets. In this series, we’ll look at which S&P 500 Utilities stocks offer an attractive upside potential over the next 12 months based on analysts’ mean price targets.