Meeting the insatiable demand for energy has been accentuated by the rapid growth of AI data centers. By 2030, it is estimated they will consume 9% of all the electricity generated domestically. This is driving many electric companies to turn to nuclear reactors and various sorts of renewable and clean energy options. Two major players in the utilities sector are Duke Energy Co. (NYSE: DUK) and NRG Inc. (NYSE: NRG). The two electric companies cover over 15 million customers and are spread throughout more than 20 states. The most obvious distinction between the two is that Duke Energy is a regulated utility while NRG is engaged in the competitive deregulated energy markets. For investors, the question is which stock can provide more gains in 2025? Here’s a breakdown of both companies to help you decide.
Duke Energy: A Classic Utility Business Model
When you think of a classic utility company, Duke Energy should come to mind. Its core business is its regulated electric and natural gas utilities. Duke owns and operates power plants, transmission lines, and distribution networks that deliver electricity and natural gas to its 8.2 million customers, primarily in the South. Duke is targeting net-zero methane emissions from its natural gas business by 2030 and net-zero carbon emissions from electricity generation by 2050. The company is relatively low risk with the exception of its exposure to hurricane season in Florida. In fact, Duke expects hurricane restoration costs of up to $2.9 billion for the 2024 hurricane season, which saw devastation from Milton, Debby, and Helene. The company had to restore 5.5 million outages during the historic storm season.
The stock is a dividend aristocrat currently paying a 3.82% annual dividend yield. At the current PE of 20.10, the stock trades at a discount to its 2023 and 2024 PE of around 31.
Flat Q3 2024 Results and Reaffirmed Guidance
Utilities are generally boring stocks generating predictable, stable, and steady revenues. Duke Energy didn’t disappoint in breaking the mold in Q3 2024. The company reported EPS of $1.62, beating consensus analyst estimates by 7 cents. Revenues rose 2.1% year-over-year (YoY) to $8.16 billion, beating the $8.06 billion consensus estimates.
Management reaffirmed guidance for the full year 2024 with EPS between $5.85 to $6.10 versus $5.98 consensus estimates. They also confirmed their long-term adjusted EPS growth rate of 5% to 7% through 2028 and of the 2024 midpoint of $5.98.
Duke Energy CEO Lynn Good commented, “As we look ahead to 2025 and beyond, we have strong momentum driven by our track record of constructive regulatory outcomes, including our recent IRP approvals in the Carolinas, as well as our robust growth in our attractive jurisdictions. These tailwinds give us confidence in our long-term outlook, and we are reaffirming our 5% to 7% EPS growth rate through 2028, up the midpoint of our 2024 range.” Duke Energy stock has gone up 12.84% in the last 12 months.
NRG Energy: Surfing the Deregulated Markets
NRG operates primarily in deregulated electricity markets, where there is competition among energy providers. Regulated markets typically have a single major utility that controls the electricity generation, transmission, and distribution, like Duke Energy. Deregulated markets have market-based pricing determined by supply and demand, as energy suppliers can access existing transmission and distribution infrastructure owned by the utility company.
While consumers can often enjoy lower prices in these markets, anomalies can occur during extreme weather, sending prices to sky-high levels. This was the case during the blizzard of 2021 in Texas when consumers who signed up for wholesale variable rate plans saw their electric bills surge to $5,000 during the weeklong storm.
Volatility Is the Norm: Raising Guidance
NRG Energy reported Q3 2024 EPS of $1.90, missing consensus analyst estimates by 10 cents. Revenue fell 9.1% YoY to $7.22 billion versus a single analyst’s estimate of $9.38 billion.
The company announced a $1.36 billion capital allocation, upping its stock buyback program by $1 billion to $3.7 billion through 2025.
NRG also raised full-year 2024 EPS guidance to $5.95 to $6.75, up from earlier guidance of $5.00 to $6.30, versus $6.36 consensus analyst estimates. NRG stock has gone up 104% in the last 12 months.
