The utility sector is poised for significant growth, fueled by a strong emphasis on utility-scale solar and battery storage projects. Moreover, large-scale energy manufacturing initiatives, joint ventures, and major renewable energy projects, supported by government backing, are propelling the growth of the green economy.

Therefore, watching strong stocks like NextEra Energy, Inc. (NEE) and Duke Energy Corporation (DUK) could be wise for gaining exposure to the green economy.

Despite the need for stronger energy policies, sustainability will remain a top priority for business leaders and policymakers in the U.S. in 2024. Companies are expected to increase capital expenditure, with more firms seeking Department of Energy funding for manufacturing and demonstration projects. This shift underscores a commitment to sustainable practices and innovation in the energy and utility sector.

Utilities, which provide essential services like heat, water, and electricity, attract investors due to their stability. Growth in infrastructure, including charging networks and hydrogen hubs, is expected to enhance the adoption of innovative technologies. The global utilities market is projected to grow at a 6.8% CAGR, reaching $8.31 trillion by 2027, fueled by technological integration and sustainability initiatives.

Moreover, the manufacturing industry is evolving with decentralized energy resources, grid modernization, decarbonization, and advanced automation. As a result, the global green technology market is projected to grow at a 29.5% CAGR, reaching $134.9 billion by 2030. Furthermore, increased investment in renewables, regulatory shifts, and rising electricity demand make utility stocks appealing for investors.

Considering these conducive trends, let’s analyze the fundamental aspects of the three green picks.

NextEra Energy, Inc. (NEE)

NEE and its subsidiaries generate, transmit, distribute, and sell electric power to retail and wholesale customers. The company generates electricity through wind, solar, nuclear, natural gas, and other clean energy sources.

In terms of the trailing-12-month gross profit margin, NEE’s 61.33% is 36.3% higher than the 44.99% industry average. Likewise, its 30.63% trailing-12-month EBIT margin is 44.2% higher than the industry average of 21.25%. On the other hand, its 0.15x trailing-12-month asset turnover ratio is 32.5% lower than the industry average of 0.22x.

During the second quarter that ended June 30, 2024, NEE reported operating revenues of $6.07 billion, down 17.4% year-over-year. Similarly, its operating income declined 40.3% from the prior-year quarter to $1.67 billion. In addition, its adjusted earnings came in at $1.97 billion, or $0.96 per share, up 10.7% and 9.1% year-over-year, respectively.

Street expects NEE’s EPS for the quarter ended September 30, 2024, to increase 3.6% year-over-year to $0.97. Its revenue for fiscal 2024 is expected to decline 2.9% year-over-year to $27.29 billion. NEE surpassed the Street EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 2.2% to close the last trading session at $82.79.

NEE’s POWR Ratings reflect a mixed outlook. It has an overall rating of C, which translates to Neutral in our proprietary POWR Ratings system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.

It is ranked #9 out of 59 stocks in the Utilities – Domestic industry. It has a C grade for Stability, Sentiment, and Quality. Click here to see NEE’s ratings for Growth, Value, and Momentum.

Duke Energy Corporation (DUK)

DUK and its subsidiaries operate as an energy company in the United States. It operates through two segments: Electric Utilities and Infrastructure (EU&I), and Gas Utilities and Infrastructure (GU&I).

In terms of the trailing-12-month EBIT margin, DUK’s 26.45% is 24.5% higher than the 21.25% industry average. Likewise, its 47.63% trailing-12-month EBITDA margin is 30.3% higher than the 36.55% industry average. But, DUK’s 2.37% trailing-12-month Return on Total Capital is 12.5% lower than the 2.70% industry average.

DUK’s total operating revenues for the second quarter that ended June 30, 2024, increased 9% year-over-year to $7.17 billion. Its operating income rose 19.4% over the year-ago value to $1.71 billion. Also, net earnings and adjusted EPS stood at $921 million and $1.18, reflecting increases of 29% and 29.7% year-over-year, respectively.

Analysts expect DUK’s revenue for the quarter ended September 30, 2024, to increase 1.8% year-over-year to $8.14 billion. Its EPS for the same quarter is expected to decrease 7% year-over-year to $1.80. It surpassed the EPS estimates in three of the trailing four quarters. Over the past month, the stock has declined marginally to close the last trading session at $117.12.

DUK’s uncertain outlook justifies its overall rating of C, which translates to Neutral in our proprietary rating system.

It has a C grade for Sentiment and Quality. DUK is ranked #8 in the Utilities – Domestic industry. Click here to see DUK’s ratings for Growth, Value, Momentum, and Stability.

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NEE shares were trading at $84.06 per share on Wednesday afternoon, up $1.27 (+1.53%). Year-to-date, NEE has gained 41.47%, versus a 23.57% rise in the benchmark S&P 500 index during the same period.

About the Author: Abhishek Bhuyan

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments. More...

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