50.74 -0.02 (-0.03%)
After hours: 5:35PM EDT
|Bid||0.00 x 0|
|Ask||0.00 x 0|
|Day's Range||50.35 - 50.88|
|52 Week Range||47.37 - 57.23|
|PE Ratio (TTM)||8.36|
|Expense Ratio (net)||0.14%|
Dominion Energy (D), the third-largest utility by market capitalization in the S&P 500 Utilities Index (XLU), is trading at a PE (price-to-earnings) valuation multiple of 19x. The stock seems to be trading at a large discount compared to its five-year valuation average of 24x. Duke Energy (DUK) stock, the second-largest utility, is currently trading at a PE multiple of 21x, while renewables titan NextEra Energy (NEE) is trading at a PE multiple of 22x.
Analysts expect Richmond-based Dominion Energy (D) to report earnings of $1.06 per share for the quarter ended on March 31, 2018. In the comparable quarter last year, it reported earnings of $0.97 per share. The estimates represent an increase of more than 9% in its per-share earnings year-over-year.
Broader utilities (XLU) have been on a losing streak for the last few months after peaking in November 2017. NextEra Energy (NEE) is currently trading at a PE (price-to-earnings) multiple of 22.0x against its five-year historical average PE of 21.0x. Thus, NextEra Energy stock seems to be trading at a premium to its historical average. NextEra Energy stock has rallied more than 5.0% while the broader utilities have corrected 2.0% so far this year.
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.
According to Wall Street analysts’ estimates, NextEra Energy (NEE), the biggest utility by market capitalization in the country, has a potential upside of more than ~5% going forward. NextEra Energy has a mean target price of $169.1. Currently, NextEra Energy is trading at $160.20.
Wall Street analysts’ mean target price for FirstEnergy (FE) is $36.14, whereas its current market price is $34.61, implying a potential upside of ~6% for the stock over the next 12 months. Among the 17 analysts tracking FirstEnergy, eight had recommended “hold,” three had recommended “strong buy,” and six had recommended “buy” as of April 17, 2018. There were no “sell” recommendations.
On April 13, 2018, the Utilities Select Sector SPDR ETF’s (XLU) implied volatility was 15%—close to its 15-day average. The SPDR S&P 500’s implied volatility was also close to 16%—lower than its 15-day average of 18%.
FirstEnergy (FE) stock is currently trading at $34.61, 4% above its 50-day moving average and 7% above its 200-day moving average. This premium highlights its strength. Going forward, its 50-day moving average of ~$33.20 is expected to act as support.
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.
FirstEnergy (FE) stock has soared more than 15% in the last three months, significantly outperforming broader utilities (XLU). Investment from activist hedge fund Elliott Management and improved earnings growth prospects boosted FE stock, which is currently trading at an EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) ratio of 8.4x, lower than its five-year average of ~9.0x.
Ohio-based FirstEnergy (FE) is set to report its 1Q18 financial results on April 23, 2018. Wall Street analysts expect it to report EPS (earnings per share) of $0.67. In 1Q17, it had EPS of $0.78, implying that analysts expect FE’s EPS to fall 14% YoY (year-over-year).
NextEra Energy (NEE) is trading at a PE (price-to-earnings) multiple of 22x—compared to its five-year historical average PE multiple of 21x. NextEra Energy stock seems to be trading at a premium to its historical average. NextEra Energy, the top utility, is one of the most rallied stocks among the S&P 500 Utilities Index. NextEra Energy stock has soared more than 22% in the trailing 12 months and outperformed broader utilities.
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.
US utility stocks have been sluggish for the last few months. Utilities that are sensitive to the interest rate have been on a downward streak since December 2017 mainly due to tax reforms, rate hikes, and valuation concerns. Utilities continued their downtrend last week. The Utilities Select Sector SPDR ETF (XLU) fell more than 1%, while broader markets rose more than 2% during the week.
Sempra Energy (SRE), among very few other utilities in the sector, is aiming for above-average earnings growth over the next few years, which could enable higher dividend growth than the industry average. Its diversified business mix bodes well for long-term earnings growth. Sempra is expected to close its acquisition of Texas-based Oncor Electric by 2Q18, which could accelerate its earnings growth as well.
Sempra Energy’s (SRE) payout ratio in 2017 was close to 73%, fairly high compared to its five-year average payout ratio of ~59%.
Sempra Energy (SRE) is expected to pay an annualized dividend of $3.58 per share in 2018. In comparison, Edison International (EIX) will likely pay an annualized dividend of $2.42 per share this year. Analysts expect Sempra Energy’s per-share dividend growth to remain at ~9% for the next few years.
Sempra Energy (SRE), one of the leading utilities in California, declared a dividend of $0.90 per share in 1Q18, which represented a 9% increase over the previous quarter. This was Sempra Energy’s eighth consecutive annual per-share dividend increase. Sempra Energy is currently trading at a dividend yield of 3.3%—well below the industry average.
Southern Company (SO) stock witnessed a massive fall in December 2017, and the stock has since been sluggish. According to the Wall Street analyst consensus, Southern Company stock offers a potential upside of more than 5% for the next one year. It has given a mean price target of $46.1 and it’s presently trading at $43.8.
On April 12, 2018, implied volatility in Southern Company (SO) stock was 19%, close to its 15-day average. Implied volatility signifies investors’ nervousness. Higher volatility is usually associated with a fall in stock prices. Volatility in broader markets significantly came down after fears of a trade war abated recently. Implied volatility in broader markets was at 15%, while broader utilities’ (XLU) volatility was at similar levels.
How Do Southern Company’s Valuations and Ratings Look? Southern Company (SO) stock has been weak for the last few months, largely mirroring broader utilities’ performances. Due to this correction, many utility stocks from the S&P 500 Utilities Index are looking attractive from a valuation perspective.
How Do Southern Company’s Valuations and Ratings Look? The faster-than-expected pace of interest rate hikes could continue to weigh on these defensives going forward. Broader utilities (XLU) are down almost 5% year-to-date and regulated giant Southern Company (SO), one of the laggards among top utilities, has fallen more than 8% in this period.
On April 11, 2018, the implied volatility in PG&E (PCG) stock was 31%, close to its 15-day average. PG&E’s implied volatility in September 2017, before the California wildfires, was close to 15%, which was near broader utilities’ average. Higher implied volatility levels indicate investors’ increased nervousness. Higher implied volatility is often linked to a fall in stock prices and vice versa.
PG&E (PCG) stock appears to be trading at a substantial discount to peers as well as its historical average. It’s currently trading at a PE (price-to-earnings) valuation of 13x, while its five-year historical average valuation is about 21x. PCG’s discounted valuation seems apparent after its steep fall in the last six months.
Yahoo Finance's Jared Blikre and Alexis Christoforous break down the latest market action.