AES or OGE: Which Is a Better Utility Electric Power Stock?
Utilities benefit from various favorable factors, such as new electric rates, customer additions, cost management and the implementation of energy-efficiency programs. Also, the ongoing investments to improve the resiliency of electric infrastructure against extreme weather conditions and the ongoing transition to cost-effective, renewable energy sources to produce electricity aid the power industry.
Regardless of economic cycles, there is a relatively constant demand for the services offered by utilities, with the exception of significant weather variations.
Utility companies operating in the United States are taking measures to further strengthen their infrastructure, including the process of generation, transmission, distribution, storage and sale of electricity to customers.
Due to their capital-intensive nature, utilities need a steady stream of funding for both new asset acquisitions and infrastructure improvements. The Fed has not increased the benchmark rate since July 2023; it expects to cut interest rates today, Sept. 18, 2024. The probable decrease in interest rates in 2024 should act positively for utility operators planning to make large investments in infrastructure upgrades.
The U.S. electric power sector is gradually moving toward cleaner sources of energy to produce electricity. Per a U.S. Energy Information Administration (“EIA”) report, the annual share of U.S. electricity generation from renewable energy sources will be 23% in 2024 and 25% in 2025. EIA also expects the U.S. power sector to generate 3% (121 billion kilowatt-hours) more electricity this year than in 2023 as a result of increased air-conditioning demand earlier in the summer.
In this blog, we run a comparative analysis on two Zacks Utility — Electric Power companies — The AES Corporation AES and OGE Energy OGE — to decide which one is a better pick for your portfolio.
Both the stocks carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AES has a market capitalization of $13.68 billion, while OGE Energy has $8.2 billion.
AES & OGE’s Growth Projections
The Zacks Consensus Estimate for AES’ 2024 earnings is pegged at $1.90 per share on revenues of $12.77 billion. This indicates year-over-year bottom-line growth of 7.9% and a revenue increase of 0.8%.
The Zacks Consensus Estimate for OGE’s 2024 earnings is pinned at $2.14 per share on revenues of $3.31 billion. This implies year-over-year bottom-line growth of 3.4% and a revenue improvement of 23.8%.
AES & OGE Stock’s Price Performance
In the past month, AES shares have risen 10.8% compared with the industry's growth of 5.4%. Shares of OGE have risen 3.9% in the same time frame.
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AES & OGE’s Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. The current ROE for AES and OGE is 32.74% and 9.15%, respectively, compared with the industry’s 10.42%.
AES & OGE’s Debt Position
The debt-to-capital ratio is a vital indicator of the financial position of a company. It shows the amount of debt used to run a business. Currently, AES and OGE have a debt-to-capital of 80.25% and 54.03%, respectively, compared with the industry’s 60.5%.
AES & OGE’s Dividend Yield
Utility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for AES is 3.59%, and the same for OGE is 4.1%. The dividend yields of these companies are better than the Zacks S&P 500 composite’s average of 1.26%.
Outcome
Both AES and OGE Energy are evenly matched and good picks for your portfolio. They have the potential to improve further from their current position and serve the needs of their growing customer base. However, our choice at this moment is AES, given its better earnings growth, ROE and better price performance than OGE.
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OGE Energy Corporation (OGE) : Free Stock Analysis Report
The AES Corporation (AES) : Free Stock Analysis Report