Utilities are well-established and fundamentally resilient because the demand for these services typically remains unaffected by economic fluctuations. Companies in this sector offer essential services such as electricity, gas, water, and telecommunications, which are consistently needed.
Against this backdrop, investors could consider high-quality utility stocks Centrica plc (CPYYY), Brookfield Infrastructure Corporation (BIPC), and Genie Energy Ltd. (GNE) for conservative investors.
The growth of the energy and utility market is positively influenced by rising energy demand in both developing and developed countries and a focus on green energy production. The utility market is expected to grow at a CAGR of 6.4% to reach $8.83 trillion by 2028.
Furthermore, the generative AI market in the utilities sector is experiencing growth as utilities increasingly recognize its potential to revolutionize their operations. The global generative AI In utilities market is expected to grow at a CAGR of 34% by 2033.
Considering these factors, let’s examine the fundamentals of the utility sector stock picks.
Centrica plc (CPYYY)
Headquartered in Windsor, the United Kingdom, CPYYY is an integrated energy company operating in the United Kingdom, Ireland, Scandinavia, North America, and internationally. The company operates through British Gas Services & Solutions, British Gas Energy, Centrica Business Solutions, Bord Gáis Energy, Centrica Energy, and Upstream segments.
CPYYY pays an annual dividend of $0.20, which translates to a yield of 3.16% at the current share price. Its four-year average dividend yield is 1.04%.
CPYYY’s trailing-12-month ROCE of 23.30% is 146.9% higher than the industry average of 9.44%. Its trailing-12-month ROTA of 6.711% is 127.5% higher than the industry average of 2.69%.
During the six months that ended June 30, 2024, CPYYY’s total group revenue was reported at £10.54 billion ($13.45 billion), and its gross profit at £2.68 billion ($3.42 billion). Its profit for the period stood at £1.35 billion ($1.72 billion), and its earnings per share at 24.6pence.
The stock has gained marginally intraday to close its last trading session at $6.42.
CPYYY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Value and a B for Momentum, Quality, and Sentiment. It is ranked #1 out of 53 stocks in the Utilities - Foreign industry.
Beyond what is stated above, we’ve also rated CPYYY for Stability and Growth. Get all CPYYY ratings here.
Brookfield Infrastructure Corporation (BIPC)
BIPC and its subsidiaries own and operate regulated natural gas transmission systems in Brazil. The company also engages in regulated gas and electricity distribution operations in the United Kingdom and electricity transmission and distribution and gas distribution in Australia.
BIPC pays an annual dividend of $1.62, which translates to a yield of 4.35% at the current share price. Its four-year average dividend yield is 3.46%. BIPC has paid dividends for the past three years.
In terms of the trailing-12-month Return on Total Capital, BIPC’s 12.21% is 205.5% higher than the 4% industry average. Likewise, its 36.76% trailing-12-month net income margin is 182.3% higher than the 13.02% industry average. Furthermore, the stock’s 82.31% trailing-12-month EBITDA margin is 124.7% higher than the 36.63% industry average.
For the fiscal second quarter ended June 30, 2024, BIPC’s revenues rose 20.7% year-over-year to $5.14 billion. Net income attributable to the partnership came in at $8 million. Its consolidated funds from operations rose 27.2% year-over-year to $1.42 billion. In addition, its FFO per unit came in at $0.77, representing an increase of 6.9% year-over-year.
For the quarter ending September 2024, BIPC’s FFO is expected to increase 8.5% year-over-year to $0.77. Its revenue for fiscal 2024 is expected to increase 6.3% year-over-year to $19.05 billion.
Shares of BIPC have gained 25.6% over the past nine months to close the last trading session at $37.28.
BIPC has an overall rating of B, equating to Buy in our proprietary rating system.
BIPC has a B grade for Growth, Momentum, and Quality. It is ranked #1 out of 60 stocks in the Utilities - Domestic industry.
In addition to the POWR Ratings highlighted above, one can access BIPC’s ratings for Value, Sentiment, and Stability here.
Genie Energy Ltd. (GNE)
GNE supplies electricity and natural gas to residential and small business customers in the United States and internationally. It operates in two segments: GRE and Genie Renewables.
GNE pays an annual dividend of $0.30, which translates to a yield of 1.87% at the current share price. Its four-year average dividend yield is 2.25%.
GNE’s trailing-12-month ROTC of 17.44% is 336.4% higher than the industry average of 4%. Its trailing-12-month asset turnover ratio of 1.45x is 568.4% higher than the industry average of 0.22x.
GNE’s total revenue for the fiscal second quarter that ended March 31, 2024, stood at $90.70 billion. In addition, its adjusted EBITDA was reported at $12 million. Also, its non-GAAP net income attributable to GNE stood at $10.10 million and $0.37 per share.
GNE’s shares have gained 4.7% over the past month and to close the last trading session at $16.07.
GNE has an overall B rating, equating to Buy in our proprietary rating system.
It has a B grade for Momentum, Value, and Quality. Within the Utilities - Domestic industry, it is ranked #2.
In addition to the POWR Ratings we’ve stated above, we also have GNE’s ratings for Stability, Sentiment, and Growth. Get all GNE ratings here.
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CPYYY shares were trading at $6.65 per share on Monday afternoon, up $0.23 (+3.58%). Year-to-date, CPYYY has declined -6.89%, versus a 13.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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