Which utility stocks could shine brightest in 2025? – Magic Post

Meeting the insatiable demand for energy has been exacerbated by the rapid growth of artificial intelligence data centers. By 2030, it is estimated that it will consume 9% of all electricity generated domestically. This is prompting many electricity companies to switch to nuclear reactors and different types of renewable and clean energy options. Two of the major players in the utilities sector are Duke Energy Company New York Stock Exchange: Duke and NRG Company New York Stock Exchange: NRG. The two electric companies cover more than 15 million customers and are spread across more than 20 states. The most obvious difference between the two is that Duke Energy is a regulated utility while NRG operates in competitive, unregulated energy markets. For investors, the question is which stock could provide more gains in 2025? Here are details of both companies to help you decide.

Duke Energy: The Classic Utility Business Model

Duke Energy Today

$110.73 +1.47 (+1.35%)

As of 03:59 PM ET

This is a fair market price provided by Polygon.io. He learns more.

52 week range

$90.09

▼

$121.25

Dividend yield

3.77%

P/E ratio

20.35

Price target

$122.23

When you think of a classic utility company, Duke Energy should come to mind. Its primary business is regulated electric and natural gas utilities. Duke owns and operates power plants, transmission lines and distribution networks that provide electricity and natural gas to its 8.2 million customers, most of them in the South. Duke aims to reach net-zero methane emissions from its natural gas business by 2030 and net-zero carbon emissions from electricity generation by 2050. The company has relatively low exposure to the hurricane season in Florida. In fact, Duke expects hurricane recovery costs to reach $2.9 billion for the 2024 hurricane season, which saw devastation from Milton, Debbie and Helen. The company had to restore 5.5 million outages during the historic storm season.

The stock is a Dividend Aristocrat that currently pays a 3.82% annual dividend yield. At its current P/E of 20.10, the stock is trading at a discount to its 2023 and 2024 P/E of about 31.

Steady results for the third quarter of 2024 and firm guidance

Utilities are generally considered boring stocks that generate predictable, stable, and consistent revenues. Duke Energy did not disappoint in breaking the mold in the third quarter of 2024. The company reported earnings per share of $1.62, beating analysts’ consensus estimates by 7 cents. Revenue rose 2.1% year over year to $8.16 billion, beating consensus estimates of $8.06 billion.

Management reiterated full-year 2024 guidance with EPS between $5.85 to $6.10 versus consensus estimates of $5.98. They also confirmed a long-term adjusted EPS growth rate of 5% to 7% through 2028 and the 2024 midpoint of $5.98.

“As we look to 2025 and beyond, we have strong momentum driven by our track record of constructive regulatory results, including recent IRP approvals in the Carolinas, as well as our strong growth in our attractive jurisdictions,” commented Len Judd, CEO of Duke Energy. These tailwinds give us confidence in our long-term outlook, and we reaffirm an EPS growth rate of 5% to 7% through 2028, above the middle of our 2020 range. 2024. Duke Energy stock is up 12.84% in the past 12 months.

NRG Energy: Browse liberalized markets

NRG Energy Today

$111.57 +7.06 (+6.75%)

As of 03:59 PM ET

This is a fair market price provided by Polygon.io. He learns more.

52 week range

$51.26

▼

$112.79

Dividend yield

1.46%

P/E ratio

28.03

Price target

$111.43

NRG operates primarily in unregulated electricity markets, where competition exists between energy providers. Regulated markets typically have one major utility that controls electricity generation, transmission and distribution, such as Duke Energy. Deregulated markets have market-based prices determined by supply and demand, where energy suppliers can access existing transmission and distribution infrastructure owned by the utility company.

While consumers can often enjoy lower prices in these markets, anomalies can occur during severe weather, sending prices skyrocketing. This was the case during the 2021 blizzard in Texas when consumers who signed up for variable wholesale rate plans saw their electricity bills rise to $5,000 during the week-long storm.

Volatility is the norm: raise guidance

NRG Energy reported third-quarter 2024 EPS of $1.90, missing analysts’ consensus estimates by 10 cents. Revenue fell 9.1% year over year to $7.22 billion versus one analyst’s estimate of $9.38 billion.

The company announced a capital allocation of $1.36 billion, raising its stock buyback program by $1 billion to $3.7 billion through 2025.

NRG also raised its full-year 2024 EPS guidance to $5.95 to $6.75, up from previous guidance of $5.00 to $6.30, versus the $6.36 consensus analyst estimate. NRG stock is up 104% in the past 12 months.

Before you consider NRG Energy, you’ll want to hear this.

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