The U.S. utilities industry comprising water, gas, power, and electricity is popular among investors as long-term holdings and to generate a steady income for their portfolios. Owing to inelastic demand, this industry continues to rake in substantial profits irrespective of ongoing economic fluctuations.
Moreover, amid record-high inflation, the U.S. Energy Information Administration has projected residential electricity prices to increase by 3.9% between June and August.
Utility stocks have been soaring as investors sought safety amid the market uncertainties. Investors’ interest in the utilities industry is evident from the Utilities Select Sector SPDR ETF’s (XLU) 4.5% returns over the past six months compared to SPDR S&P 500 Trust ETF’s (SPY) 13.9% decline.
PPL Corporation (PPL)
Utility holding company, PPL, delivers electricity and natural gas in the United States and the United Kingdom. The company operates through two segments: Kentucky Regulated and Pennsylvania Regulated.
On May 25, 2022, PPL completed its acquisition of The Narragansett Electric Company- Rhode Island’s primary electric and gas utility, for approximately $3.80 billion. With this acquisition, PPL aims to serve all Rhode Island inhabitants with utmost diligence – thereby broadening its margins.
PPL has been paying dividends for 22 consecutive years. Its current dividend translates to a 4.78% yield, while its four-year average yield is 5.61%.
PPL’s operating revenues came in at $1.78 billion for the first quarter ended March 31, 2022, up 19% year-over-year. Its net income came in at $273 million, compared to a loss of $1.84 billion in the year-ago period. Also, its net EPS came in at $0.37, compared to a loss per share of $2.39.
PPL’s revenue is expected to increase 22.6% year-over-year to $7.09 billion in 2022. Its EPS is expected to grow 40% year-over-year to $1.47 in 2022. Over the past month, the stock has gained marginally to close yesterday’s trading session at $29.14.
PPL’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PPL has a B grade for Growth, Momentum, and Quality. Within the Utilities – Domestic industry, it is ranked #5 out of 67 stocks. Click here to see the additional POWR Ratings for Value, Stability, and Sentiment for PPL.
Otter Tail Corporation (OTTR)
OTTR and its subsidiaries engage in diversified operations like electric utility, manufacturing, and plastic pipe businesses in the United States. Its segments are Electric; Manufacturing; and Plastics.
On May 2, 2022, President and CEO Chuck MacFarlane said, “We continue to make progress on the development of Otter Tail Power’s 49.9 MW Hoot Lake Solar project, which will be constructed on and near the retired Hoot Lake Plant property in Fergus Falls, Minnesota. The project is expected to be completed in 2023 and has received renewable rider eligibility approval in Minnesota.”
OTTR has been paying dividends for 32 consecutive years. OTTR’s dividend payouts have grown at a 5.4% CAGR in the past three years. Its current dividend translates to a 2.44% yield, while its four-year average yield is 2.95%.
OTTR’s total operating revenues increased 43.3% year-over-year to $374.90 million for the first quarter ended March 31, 2022. Its net income came in at $72 million, up 137.4% year-over-year, while its EPS came in at $1.72, up 135.6% year-over-year.
For the quarter ended June 2022, analysts expect OTTR’s revenue to be $323.38 million, representing a 13.2% year-over-year rise. The company’s EPS is expected to increase 33.7% year-over-year to $1.35 for the same period. Moreover, it surpassed EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 6.7% to close yesterday’s trading session at $67.40.
OTTR’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, equating to a Buy in our POWR Ratings system.
Also, the stock has a B grade for Growth, Stability, Sentiment, and Quality. Within the Utilities – Domestic industry, it is ranked #2. Click here for the additional POWR Ratings for Value and Momentum for OTTR.
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PPL shares closed at $28.33 on Friday, down $-0.81 (-2.78%). Year-to-date, PPL has declined -5.03%, versus a -17.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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