Investors might find utility companies appealing as they offer essential services like water, electricity, and gas, which makes them less susceptible to economic volatility. Moreover, in an era of increasing focus on clean energy, utility firms are strategically positioned for sustained growth.
Hence, it may be wise for investors to keep track of well-regarded utility stocks Centrais Elétricas Brasileiras S.A. - Eletrobrás (EBR), Engie Brasil Energia S.A. (EGIEY), and Enel SpA (ENLAY), which are trading under $10.
Utility stocks are known for their stability and reliability, particularly during economic challenges. Since utilities are a necessity, these stocks tend to remain resilient even in turbulent market conditions.
On top of it, the global proliferation of renewable energy due to a greater drive toward sustainability is expected to be a significant tailwind for the utility sector. The global renewable energy market is expected to reach $1.40 trillion in 2027, expanding at a 7.9% CAGR.
With the rapid growth in renewable power generation capacity investments and digital technologies entering the sector, the global utilities market is expected to reach $8.31 trillion by 2027, growing at a CAGR of 6.8%.
Given this scenario, let's delve deeper into the fundamentals of the highlighted Utilities - Foreign industry stocks, starting with the third one.
Stock #3: Centrais Elétricas Brasileiras S.A. - Eletrobrás (EBR)
EBR, headquartered in Rio de Janeiro, Brazil, is an electricity company with diverse energy generation sources, including hydroelectric, thermal, nuclear, wind, and solar plants. It also manages an extensive transmission network, serving as a key player in Brazil's power sector.
On September 4, EBR announced that it had concluded the sale of about 15.31 million common shares in Companhia Paranaense de Energia (COPEL) for a total value of R$125.30 million ($25.59 million). The company aims to simplify and optimize its portfolio through this sale.
In July, the company unveiled its plans to regain the leading role of growth in the Brazilian electricity sector through a potential investment of between R$70 billion ($14.29 billion) and R$80 billion ($16.33 billion) for the next five years.
EBR’s net operating revenue for the second quarter of 2023 increased 4.4% year-over-year to R$9.25 billion ($1.89 billion), while its gross revenue came in at R$11.02 billion ($2.25 billion), up 4.8% year-over-year.
The company’s EBITDA improved 59% from the prior-year quarter to R$6.60 billion ($1.35 billion). Its consolidated net income rose 15.6% from the same period last year to R$1.62 billion ($330.57 million).
Street expects EBR’s revenue to increase 36.6% year-over-year in the current quarter (ending September 2023) to $2.06 billion. For the fiscal year 2023, its revenue is projected to reach $7.37 billion, registering an increase of 13.7% from the prior year. Additionally, it topped the revenue estimates in three of the trailing four quarters.
The stock has gained 22.5% over the past six months and 9.2% over the past five days to close the last trading session at $7.51.
EBR’s POWR Ratings reflect solid prospects. EBR has an A grade for Sentiment and a B for Growth and Quality. It is ranked #13 out of 62 stocks in the Utilities - Foreign industry. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Click here to see the other ratings of EBR for Value, Momentum, and Stability.
Stock #2: Engie Brasil Energia S.A. (EGIEY)
Headquartered in Florianópolis, Brazil, EGIEY generates, sells, and trades electrical energy across various sources, including hydro, thermal, wind, solar, and biomass plants. Additionally, it operates a substantial natural gas pipeline network and is involved in solar panel-related activities.
On September 8, EGIEY announced that it had begun working on the implementation of the Serra do Assuruá Wind Complex in the central-northern region of Bahia. With a forecast for commercial operations to begin in the second half of 2024, this could boost the company’s operational capacity.
On August 11, EGIEY and Andritz Hydro Brazil announced that they had signed an agreement for the modernization of the Jaguara Hydropower Plant, situated in Rifaina, state of São Paulo. The modernization of EGIEY’s portfolio could prove to be beneficial.
For the fiscal second quarter of 2023, EGIEY’s net operating revenue amounted to R$2.61 billion ($532.91 million). Its EBIT increased 1.5% year-over-year to R$1.48 billion ($301.78 million).
Its adjusted net income increased 56.8% from its year-ago value to R$806 million ($164.57 million). The company’s net income per share came in at R$0.90, registering an improvement of 85.8% from the prior-year quarter.
EGIEY’s revenue is projected to reach $554.17 million for the fiscal third quarter ending September 2023, indicating a 3.9% increase year-over-year. EGIEY’s shares have gained 30.1% over the nine months and 27.3% year-to-date to close the last trading session at $8.70.
EGIEY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to Buy in our proprietary rating system.
It also has a B for Stability and Quality. It is ranked #11 in the same industry. Click here to view EGIEY’s ratings for Growth, Value, Momentum, and Sentiment.
Stock #1: Enel SpA (ENLAY)
Based in Rome, Italy, ENLAY operates as an integrated electricity and gas operator worldwide. The company sells electricity, transports and markets natural gas, and constructs and operates generation plants and distribution grids.
On July 13, ENLAY announced that it had signed an agreement with INPEX Corporation through its fully-owned subsidiary Enel Green Power S.p.A. to sell 50% of the two entities owning all of the group activities in Australia, namely Enel Green Power Australia Pty Ltd and Enel Green Power Australia Trust.
Upon the closing of the transaction, Enel Green Power and INPEX are expected to be jointly controlled by Enel Green Power Australia. This deal, in line with ENLAY’s current strategic plan, is expected to help generate a positive impact of nearly €87 million ($93.05 million) on ENLAY’s fiscal 2023 ordinary and reported EBITDA.
In the same month, the company’s electric mobility business, Enel X Way, and Saba Italia announced a collaboration to provide 51 charging stations in 17 Saba Italia-managed parking lots across Italy. This partnership aims to enhance EV owners' experience and promote sustainable mobility for more livable cities.
For the fiscal first half of 2023, ENLAY’s operating profit increased 35.4% year-over-year to €6.13 billion ($6.55 billion), while its profit for the period increased 58% from the year-ago value to €3.08 billion ($3.30 billion).
Its EBITDA rose 18% from the prior-year period to €9.68 billion ($10.35 billion). Also, its earnings per share increased 50% year-over-year to €0.24.
Street expects ENLAY’s revenue for the current quarter ending September 2023 to be $34.27 billion. For the fiscal year 2023, its revenue is expected to be $115.74 billion. Additionally, it topped the revenue estimates in each of the trailing four quarters, which is promising.
The stock has gained 37.5% over the past year and 25.1% year-to-date to close the last trading session at $6.68.
It’s no surprise that ENLAY has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has a B grade for Growth, Value, and Sentiment. Within the same industry, it is ranked #2.
In addition to the POWR Ratings we’ve stated above, we also have ENLAY’s ratings for Momentum, Stability, and Quality. Get all ENLAY ratings here.
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ENLAY shares were trading at $6.64 per share on Friday afternoon, down $0.05 (-0.67%). Year-to-date, ENLAY has gained 28.94%, versus a 16.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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