The global utilities market is growing due to increased investments in renewable power generation and the adoption of digital technologies, leading to enhanced operational efficiency and customer satisfaction in the power industry. Integrating smart grids and sensors contributes to improved productivity and asset management in the sector.
Therefore, investors could consider investing in top utility stocks Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (EDN), Central Puerto S.A. (CEPU), and Enel SpA (ENLAY).
The utility sector pulled back a bit in 2023 as investors shifted away from defensive stocks to mega-cap growth names. However, its long-term outlook remains optimistic as utilities take center stage in the transition away from fossil fuels and countries actively try to reduce their carbon footprints.
The global electric power transmission market grows with rising electricity demand, technological advancements, and government support for renewable energy, bolstering the utility sector. Increased electric vehicle adoption and strategic projects supported by authorities further propel market expansion.
The global utilities market is expected to grow at a CAGR of 6.8% to reach $8.31 trillion by 2027.
Furthermore, the global digital utility market gains momentum from increasing renewable projects and energy efficiency mandates driven by stringent regulations. The global digital utility market is expected to grow at a CAGR of 9.6% from 2023 to 2030.
Considering these conducive trends, let’s examine the fundamentals of three Utilities - Foreign stock picks, beginning with the third choice.
Stock #3: Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (EDN)
Headquartered in Buenos Aires, Argentina, EDN is involved in electricity distribution and sales in Argentina.
EDN’s trailing-12-month ROTA of 7.77% is 224.8% higher than the industry average of 2.39%. Its 0.37x trailing-12-month asset turnover ratio is 64.6% higher than the 0.22x industry average.
In the third quarter, which ended September 30, 2023, EDN’s revenue grew 22.1% year-over-year to AR$138.36 billion ($170.37 million). The company reported operating profit and profit per share of AR$617 million ($759.77 thousand) and AR$86.90, respectively, compared to its previous-year quarter’s operating loss and loss per share of AR$14.51 billion ($17.86 million) and AR$16.60.
As of September 30, 2023, its total assets amounted to ARS1.01 trillion ($1.25 billion), compared to its total assets of ARS975.37 billion ($1.20 billion) as of December 31, 2022.
EDN’s revenue is expected to grow 64.3% year-over-year to $2.13 billion for the fiscal year ending December 2024. Its EPS for the current year is expected to be $43.95.
EDN’s shares have gained 120.5% over the past nine months and 65.8% over the past three months to close the last trading session at $18.39.
EDN’s POWR Ratings reflect its positive prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
EDN has an A grade for Value and a B for Growth. Within the Utilities - Foreign industry, it is ranked #8 among 53 stocks.
In addition to the POWR Ratings stated above, one can access EDN’s additional Momentum, Stability, Sentiment, and Quality ratings here.
Stock #2: Central Puerto S.A. (CEPU)
Based in Buenos Aires, Argentina, CEPU specializes in electric power generation through conventional and renewable sources. It is also active in the natural gas transport and distribution business.
On November 17, 2023, CEPU invested $150 million to convert the Brigadier Lopez Thermoelectric Plant into a combined cycle, increasing its capacity to 432MW. The project, located in Sauce Viejo, Santa Fe, prioritizes efficiency and the use of natural gas from Vaca Muerta, contributing to the energy transition.
With an emphasis on optimization and modernization, the initiative is expected to create jobs and engage local suppliers.
CEPU declared a cash dividend of $0.066 per common share. The company pays $0.86 annually, which translates to a yield of 9.68% on the prevailing price level. Its four-year average dividend yield is 1.81%. The company has raised its dividend payouts at a CAGR of 21.8% over the past five years.
During the third quarter, which ended September 30, 2023, CEPU generated revenues and operating income of AR$58.27 billion ($71.75 billion) and AR$52.24 billion ($64.33 million), respectively, up 20.5% and 30.7% from the prior-year quarter. The company's net income for the period and EPS stood at AR$3.70 billion ($4.55 million) and AR$2.99, respectively.
Street expects CEPU’s revenue is expected to be $542.31 million for the fiscal year ending December 2024. Its EPS for the same year is expected to increase 350% from the prior year to $1.08.
CEPU’s shares increased 60% over the past nine months and 57.5% over the past three months to close the last trading session at $8.93.
CEPU’s POWR Ratings reflect this sound outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has an A grade for Quality and a B for Value. Within the same industry, it is ranked #5.
Click here for CEPU’s additional Growth, Momentum, Stability, and Sentiment ratings.
Stock #1: Enel SpA (ENLAY)
Based in Rome, Italy, ENLAY is a global energy company involved in electricity and gas operations, spanning generation, distribution, transmission, and sales, with a diverse portfolio of power plants.
On January 4, ENLAY concluded the sale of a U.S. renewable asset portfolio to ORMAT Technologies for $271 million. The portfolio comprises EGPNA's entire geothermal assets and various small solar plants, with a total operational capacity of about 150 MW.
ENLAY’s trailing-12-month ROTA of 0.44x is 94.4% higher than the industry average of 0.22x. Its $18.70 billion trailing-12-month cash from operations is significantly higher than the 1.11 billion industry average.
ENLAY declared a cash dividend of $0.231 per common share. The company pays $0.46 annually, which translates to a yield of 6.38%% on the prevailing price level. Its four-year average dividend yield is 5.75%. The company has raised its dividend payouts at a CAGR of 5.7% and 9.1% over the past three and five years.
In the first quarter ended September 29, 2023, ENLAY reported total revenue of €26.41 billion ($28.90 billion). The company's operating profit grew 4.2% from the previous-year quarter to €2.95 billion ($3.23 billion). Its total costs decreased 29.7% year-over-year to €22.82 billion ($24.97 billion). Moreover, its EPS stood at €0.10.
Analysts expect ENLAY’s revenue to be $31.51 billion for the fourth quarter ended December 2023. The company surpassed the revenue estimates in three of the trailing four quarters, which is impressive.
The stock has gained 26.3% over the past year and 23.9% over the past three months to close the last trading session at $7.25.
ENLAY’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
It has a B grade for Value and Stability. Within the same industry, it is ranked #3.
To see ENLAY’s additional POWR Ratings for Growth, Momentum, Sentiment, and Quality, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
ENLAY shares were trading at $7.32 per share on Monday morning, up $0.07 (+0.96%). Year-to-date, ENLAY has declined -1.01%, versus a -0.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
3 Solid Utility Stocks to Buy StockNews.com
