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AVANGRID (AGR) Benefits From Investment & Debt Management

AVANGRID Inc. AGR has been gaining from consistent investments to strengthen infrastructure. An expanding wind and solar generation portfolio is likely to drive its performance over the long run.

AVANGRID currently carries a Zacks Rank #3 (Hold) and has delivered an average earnings surprise of 17.6% in the last four quarters. AGR’s long-term (three to five years) earnings growth is currently pegged at 5.9%.

Moreover, AVANGRID’s current dividend yield of 3.5% is better than the industry’s average of 3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Tailwinds

AVANGRID plans to create a clean generation portfolio with 90% renewable assets and achieve the Scope 1 carbon neutrality goal by 2035.

Moreover, AVANGRID Renewables’ onshore construction of Vineyard Wind I, an 806-megawatt (“MW”) utility-scale offshore wind project, is underway. The project is on track to reach the milestone of 2022, which is to reduce carbon emissions by more than 1.6 million tons per year.

For the first half of 2022, the primary driver for year-over-year improved results was a $181-million gain realized as a result of the restructuring of the partnership agreement for New England offshore wind lease areas. Renewables is also advancing the construction of 1,600 MW of new capacity on and offshore.

To maintain and upgrade infrastructure and facilities, AVANGRID plans to invest $1.2 billion through the remainder of 2022 to provide customers with safe and reliable infrastructure and support the clean energy transition. AGR makes regulated and contracted investments, which guarantee earnings and cash flows.

AVANGRID’s total debt to total capital ratio for the second quarter of 2022 was 29%, better than the electric power industry’s 58.1%. The times interest earned ratio at the end of the second quarter of 2022 was 4.0, up from the second-quarter 2021 level of 3.3. The strong ratio is indicative of the firm’s ability to meet its debt obligations in the near future without any difficulty.

Headwinds

Although AVANGRID keeps investing in development opportunities, the timely completion of projects within budget might not be possible. The denial of the necessary regulatory approvals for the PNM Resources merger has affected AVANGRID’s business and future growth plans.

AVANGRID is exposed to increasing interest rates on borrowings, which can adversely affect the company’s performance. To meet the stringent rules and regulations and maintain cyber security, AGR needs to bear additional costs.

Price Performance

In the past six months, shares of AVANGRID have rallied 10.8% compared with the industry’s 6.9% growth.

Zacks Investment Research
Zacks Investment Research


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Stocks to Consider

Some better-ranked stocks from the same industry are NextEra Energy NEE, Alliant Energy LNT and Entergy ETR, each currently carrying a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for 2022 earnings per share of NextEra Energy, Alliant Energy and Entergy has moved up 13.3%, 6.5% and 6%, respectively, year over year.

The long-term earnings growth of NextEra Energy, Alliant Energy and Entergy is projected at 9.7%, 6.2% and 6.7%, respectively.

NEE, LNT and ETR delivered an average earnings surprise of 5.5%, 5.8% and 6.9%, respectively, in the last four quarters.


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