Is Consolidated Edison a Good Utilities Stock to Own?

NYSE: ED | Consolidated Edison Inc. News, Ratings, and Charts

ED – Leading energy-delivery company Consolidated Edison Inc. (ED) has been trying to expand its services across the country and strengthen its market position. However, its stock’s price dipped more than 2% on Monday after Bank of America downgraded its rating. So, considering ED’s weak fundamentals and poor growth prospects, is the stock worth owning now? Read more to find out.

Consolidated Edison, Inc. (ED) is one of the nation’s largest investor-owned energy-delivery companies. The New York City-based concern owns, operates, and develops renewable and energy infrastructure projects, offers wholesale and retail customers energy-related products and services, and invests in electric and gas transmission projects. The company’s stock has climbed 3% in price over the past month, fueled by its efforts to expand its operational capabilities and accelerate its growth through various unique clean energy innovations.

However, the stock has lost 4.8% in price over the past six months to close yesterday’s trading session at $75.51. The company’s relatively weak fundamentals and low-profit margins imply bleak growth prospects.

In addition, Bank of America recently downgraded the stock from “Neutral” to “Underperform,” indicating bearish sentiment about the stock’s future price performance.

Here’s what we think could shape ED’s performance in the near term:

Additional Financing

In June, ED agreed to issue 10,100,000 shares of common stock. The company intended to invest the net proceeds from the stock sale in its regulated utility subsidiary, Consolidated Edison Company of New York, Inc., for construction funding and other general corporate purposes. However, using equity financing as a funding source for future projects could dilute share value for existing shareholders and should be viewed with some alarm.

Weak Financials and Profitability

For the second quarter, ended June 30, 2021, ED’s operating expenses increased 14% year-over-year to $2.55 billion. Its operating income declined 12.7% from its year-ago value to $418 million. The company’s net income decreased 13.2% from the prior-year quarter to $165 million over this period. And its EPS declined 15.8% year-over-year to $0.48 over this period.

ED’s 19.4% trailing-12-months EBIT margin is 8.7% lower than the 21.2% industry average. Also, its ROC and ROA are 9.2% and 29.3% lower than the respective industry averages. Furthermore, its 8.7% trailing-12-months net profit margin is 26.1% lower than the 11.7% industry average.

Discounted Valuation

In terms of non-GAAP forward P/E, the stock is currently trading at 17.38x, which is 7.7% lower than the 18.81x industry average. Also, its 2x forward Price/Sales multiple is 17.9% lower than the 2.43x industry average. Also, ED’s 3.84x forward EV/Sales is 8.6% lower than the 4.2x industry average.

The stock’s forward 10.4x EV/EBITDA multiple is 10.5% lower than the 11.62x industry average.

Consensus Rating and Price Target Indicate Potential Downside

Of the six Wall Street analysts that have provided ratings for the stock, four rated it Sell. The $71.5 average analyst price target represents a potential 5.3% downside. The price targets range from a low of $65 to a high of $78.

POWR Ratings Reflect Uncertainty

ED has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. ED has an F grade for Sentiment. This is justified given the stock’s poor analyst ratings.

The stock also has a D grade for Growth and Momentum. The company is currently trading below its 50-day and 200-day moving averages of $74.87 and $73.99, respectively, which is in sync with its Momentum grade. In addition, ED’s weak financials and profitability are consistent with the Growth grade.

Of the 56 stocks in the F-rated Utilities -Domestic industry, ED is ranked #29.

Beyond what I’ve stated above, one can view ED ratings for Stability, Value, and Quality here.

Bottom Line

ED’s poor fundamentals pose a threat to the stock’s future price performance. In addition, ED is currently trading below its 50-day and 200-day moving averages, indicating a downtrend. Thus, we think investors should wait for an improvement in its prospects before investing in the stock.

How Does Consolidated Edison Inc. (ED) Stack Up Against its Peers?

While ED has an overall C rating, one might want to consider its industry peer, UGI Corporation (UGI), having an overall A (Strong Buy) rating.


ED shares were unchanged in premarket trading Thursday. Year-to-date, ED has gained 7.75%, versus a 21.84% rise in the benchmark S&P 500 index during the same period.


About the Author: Pragya Pandey


Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
EDGet RatingGet RatingGet Rating
UGIGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Stocks Racing to Bottom

The S&P 500 (SPY) has raced 15% lower in just a few short weeks. Sure we might see a short term bounce here or there. Unfortunately most signs still point lower. Why is that the case? How much lower could we go? And what is the best way to trade this market? 40 year investment veteran Steve Reitmeister provides the answers in his new market outlook below...

:  |  News, Ratings, and Charts

2 Stocks Under $50 Worth Snapping up Right Now

With the market volatility and odds of recession perpetually increasing with every interest rate hike by the Federal Reserve, investors would be advised to load up on attractively priced stocks of businesses with robust demand and stable growth trajectory. Hence, fundamentally sound stocks Kroger (KR) and APA (APA), currently trading under $50, could be ideal investments. Keep reading…

:  |  News, Ratings, and Charts

3 Stocks You'll Want to Leave out of Your Retirement Portfolio

The stock market is experiencing wild swings amid the consecutive Federal rate hikes and deteriorating investor sentiments. Moreover, the aggressive rate hikes are raising recession concerns. Therefore, fundamentally weak stocks Uber Technologies (UBER), Workhorse Group (WKHS), and AppHarvest (APPH) might be best avoided for your retirement portfolio. Also, these stocks do not pay dividends. Read on…

:  |  News, Ratings, and Charts

The Worst Stock to Buy During Times of High Inflation

Rent the Runway (RENT) is slated to cut its workforce by 24% in the face of declining consumer spending amid soaring prices. Its subscriber count dropped in the last quarter. The stock has lost more than 70% year-to-date. Given the stubbornly high inflation, RENT might be best avoided. Keep reading…

:  |  News, Ratings, and Charts

3 Stocks You'll Want to Leave out of Your Retirement Portfolio

The stock market is experiencing wild swings amid the consecutive Federal rate hikes and deteriorating investor sentiments. Moreover, the aggressive rate hikes are raising recession concerns. Therefore, fundamentally weak stocks Uber Technologies (UBER), Workhorse Group (WKHS), and AppHarvest (APPH) might be best avoided for your retirement portfolio. Also, these stocks do not pay dividends. Read on…

Read More Stories

More Consolidated Edison Inc. (ED) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All ED News