Xcel Energy Inc.’s XEL strategic investments in infrastructure projects and focus on renewable expansion will further boost its earnings performance. The company’s expanding customer base and rising demand act as tailwinds.
However, this Zacks Rank #3 (Hold) company has to face risks related to failure of transmission and distribution lines.
Xcel Energy aims to spend $29.5 billion during the 2023-2027 period, excluding $2-$4 billion of potential incremental investment opportunities planned in the same time frame. These investments are aimed to strengthen and expand its transmission, distribution, electric generation and renewable projects.
High quality and reliable services provided by the company attract new customers and allow Xcel Energy to serve an expanding electric and natural gas customer base. In second-quarter 2023, the electric and natural gas’ customer base increased 1.1% each. In the same time frame, sales volumes for the electric segment improved 0.6% and natural gas volumes increased 0.1% year over year.
Xcel Energy is focusing on clean-energy transition. After completing six wind projects with 1,500 MW capacities in 2020, the company completed four wind farms, adding another 800 MW of clean energy generation capacity to its portfolio. XEL got key regulatory approval for the Minnesota resource plan, which includes the closing of coal plants like the A.S. King Plant and Sherco 3 by 2028 and 2030, respectively.
Xcel Energy’s natural gas and electric transmission and distribution operations are exposed to several risks, including explosions, leaks and mechanical setbacks. These incidents can affect the company’s operations, thereby impacting its financial performance.
XEL has plans to borrow additional funds to meet its capital expenditure target. It is likely to add an additional debt of $8.2 billion in the 2023-2027 period to meet its expenses. Additional debts will increase its interest expenses and dent margins.
Stocks to Consider
Some better-ranked stocks from the same industry are FirstEnergy Corporation FE, Pinnacle West Capital Corporation PNW and Entergy Corp. ETR, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
FirstEnergy’s long-term (three to five year) earnings growth rate is 6.45%. The Zacks Consensus Estimate for FE’s 2023 earnings per share indicates an increase of 5% from the previous year’s level.
PNW’s long-term earnings growth rate is 6.46%. The Zacks Consensus Estimate for PNW’s 2023 sales indicates an increase of 4.6% from the 2022 level.
Entergy’s long-term earnings growth rate is 5.65%. It delivered an average earnings surprise of 3.4% in the previous four quarters.
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