Utility service providers continue to reap benefits from a number of positive variables, including increased electricity tariffs, accretive acquisitions, cost reductions and the deployment of energy-efficiency initiatives. The power business also gains from continuous efforts to make electric infrastructure more resilient to adverse weather conditions and the ongoing switch to affordable, renewable energy sources for electricity production.
Utility companies in the United States are taking measures to further strengthen their infrastructure, which includes the generation, transmission, distribution, storage and sale of electricity to customers.
Utilities are all set to take advantage of the growing demand from data centers. Per the Department of Energy’s report, a significant surge in U.S. electricity demand, particularly from data centers, with projections indicating a near tripling of power use by 2028, driven by AI and cloud computing, potentially reaching 6.7% to 12% of total U.S. electricity consumption.
Utilities also need a steady stream of funding for both new asset acquisitions and infrastructure improvements, due to their capital-intensive nature. Since September 2024, the Fed has already lowered its fund rate by one percentage point. In 2025, more interest rate reductions are anticipated. Capital-intensive utilities should have improved chances as a result of the rate drop. This is because their margins and profitability will rise as a result of lower capital servicing expenses.
Utility service providers generally enjoy consistent revenue growth and profitability. Due to their capacity to create cash flows and manage returns, utilities can enhance shareholder value via regular dividend payments.
The U.S. electric power sector is gradually moving toward cleaner sources of energy to produce electricity. Per a U.S. Energy Information Administration (“EIA”) report, the annual share of U.S. electricity generation from renewable energy sources will be 25% in 2025 and 27% in 2026. EIA also expects the U.S. sales of electricity to ultimate customers in the first quarter of 2025 will total 991 billion kilowatt-hours (kWh) compared with a previous forecast of 972 billion kWh.
We have run a comparative analysis on two Zacks Utility — Electric Power companies — NiSource NI and CenterPoint Energy CNP — to decide which one is a better pick for your portfolio.
Both companies carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NiSource has a market capitalization of $18.55 billion, while CenterPoint Energy has $23.16 billion.
NI & CNP’s Growth Projections
The Zacks Consensus Estimate for NiSource’s 2025 earnings is pinned at $1.91 per share on revenues of $6.06 billion. This implies a year-over-year bottom-line increase of 9.1% and a top-line improvement of 11.1%.
The Zacks Consensus Estimate for CenterPoint Energy’s 2025 earnings is pegged at $1.75 per share on revenues of $8.87 billion. This indicates year-over-year bottom-line and top-line growth of 8% and 2.7%, respectively.
NI & CNP Stocks’ Price Performance
In the past year, NI’s shares have risen 46.6% compared with the industry's growth of 20%. Shares of CNP have risen 26.3% in the same time frame.
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NI & CNP’s Debt Position
The debt-to-capital ratio is a vital indicator of the financial position of a company. It shows the amount of debt used to run a business. Currently, NiSource and CenterPoint Energy have a debt-to-capital of 56.68% and 66.28%, respectively, compared with the industry’s 63.37%.
The times interest earned (TIE) ratio for NI is 2.9, and that for CNP is 2.4. Since both companies have a TIE ratio exceeding one, it indicates that they have enough financial flexibility to meet their near-term interest obligations.
NI & CNP’s Dividend Yield
Utility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for NiSource is 2.85%, and the same for CenterPoint Energy is 2.47%. The dividend yields of these companies are better than the Zacks S&P 500 Composite’s average of 1.3%.
Wrapping Up
Both NiSource and CenterPoint Energy stocks are well-positioned and, hence, wise investments for your portfolio. They have the potential to improve further from their current position and serve the demands of their growing customer base. However, our choice at this moment is NI, given its better growth projections, debt management, TIE ratio, dividend yield and price performance than CNP.
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NiSource, Inc (NI) : Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).
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