The utility industry is fueled by ongoing infrastructural investments and rapid expansion of renewable power generation capacities. Given the industry’s steady growth prospects, investors could consider quality utility stocks Veolia Environnement SA (VEOEY), TransAlta Corporation (TAC), and Centrica plc (CPYYY) this week.
The utility market is poised for significant growth due to the rapid expansion of renewable power generation capacities. Governments worldwide are promoting the use of renewable energy sources by providing incentives and subsidies to solar power generation companies.
As a result, the global utility market is expected to reach $8.31 trillion by 2027, growing at a CAGR of 6.8%.
Moreover, the energy storage market across the U.S. is expected to experience significant growth due to the increasing demand for refurbishment and modernization of the existing grid network. This is driven by a growing need for a reliable grid support mechanism, as well as an increasing integration of clean energy technologies.
Further, the ongoing infrastructural investments and a significant increase in demand for electricity will augment business growth. Additionally, technological innovations aimed at improving energy efficiency have created a positive business landscape for the industry.
With these favorable trends in mind, let's delve into the fundamentals of the three best Utilities - Foreign stocks, beginning with the third choice.
Stock #3: Veolia Environnement SA (VEOEY)
VEOEY, headquartered in Aubervilliers, France, is an optimized resource management group that offers water, waste, and energy management solutions. The company's geographical segments include France; Europe excluding France; Rest of the World; Global Businesses; and Other, including the various Group holding companies.
On June 14, 2023, VEOEY announced through its subsidiary SIDEM, that it will head a consortium in charge of Engineering, Procurement, and Construction (EPC) on the Mirfa 2 desalination project commissioned by Abu Dhabi National Energy Company PJSC (TAQA) and ENGIE.
This cutting-edge Reverse Osmosis Desalination (M2 RO) facility in Abu Dhabi, set to become UAE's third-largest, is expected to yield approximately €300 million ($325.39 million) in revenue for VEOEY. This should strengthen the company's global position and underline its capabilities in state-of-the-art infrastructure development.
VEOEY pays a dividend of $0.61 per share annually, translating to a 3.93% yield on the current price. Its four-year average dividend yield is 3.24%.
VEOEY’s trailing-12-month ROCE of 9.11% is 4.7% higher than the industry average of 8.70%. Its trailing-12-month asset turnover ratio of 0.63x is 162.8% higher than the industry average of 0.24x.
For the six months that ended June 30, 2023, VEOEY’s revenue increased 12.7% year-over-year to €22.76 billion ($24.68 billion). Its net income and net income per share attributable to the owners of the company rose 121.6% and 118.2% year-over-year to €522.90 million ($567.15 million) and €0.72, respectively.
The consensus revenue estimate of $48.22 billion for the fiscal year ending December 2023 reflects a 6.1% rise year-over-year. The consensus EPS estimate of $0.55 for the current year indicates a 35% year-over-year improvement. Moreover, the company surpassed the consensus revenue estimates in three of four trailing quarters, which is impressive.
Over the past year, the stock has gained 32.2%, closing the last trading session at $15.47.
VEOEY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates 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.
VEOEY has a B grade for Value, Growth, and Stability. It is ranked #8 in the 53-stock Utilities - Foreign industry.
Click here to access the additional VEOEY ratings (Momentum, Sentiment, and Quality).
Stock #2: TransAlta Corporation (TAC)
Headquartered in Calgary, Canada, TAC develops, produces, and sells electric energy through Hydro; Wind and Solar; Gas; Energy Transition; and Energy Marketing segments. It serves municipalities, medium and large industries, businesses, and utility customers.
On July 11, TAC announced the acquisition of all the outstanding common shares of TransAlta Renewables Inc. The combined company enhances diversification, and increases public float and trading liquidity, with attractive transaction metrics that unlock value to the benefit of all shareholders.
Mr. John Kousinioris, TAC’s President and Chief Executive Officer, said, “The combined company’s greater scale and enhanced positioning will drive benefits and unlock value for all of our shareholders. The combination of the two companies will be underpinned by a single strategy that provides greater clarity to investors and will support future growth.”
On July 27, TAC declared a quarterly dividend of $0.04, payable on October 1, 2023. TAC pays a dividend of $0.16 per share annually, translating to a 1.67% yield on the current price. Its four-year average dividend yield is 1.67%.
TAC’s trailing-12-month gross profit margin of 43.84% is 12.8% higher than the industry average of 38.86%. Its trailing-12-month asset turnover ratio of 0.36x is 51.4% higher than the industry average of 0.24x.
For the fiscal second quarter that ended June 30, 2023, TAC’s revenues increased 36.5% year-over-year to C$625 million ($461.57 million). Net earnings attributable to common shareholders amounted to C$62 million ($45.79 million) and C$0.23 per share compared to a loss of C$80 million ($59.08 million) and C$0.30 per share in the prior-year quarter.
Moreover, its adjusted EBITDA increased 38.7% from the year-ago value to C$387 million ($285.80 million).
Analysts expect TAC’s revenue to increase 5.6% year-over-year to $2.32 billion for the current year ending December 2023. Additionally, it topped the consensus revenue estimates in three of the trailing four quarters.
The stock has gained 17.4% over the past six months to close the last trading session at $9.59.
TAC’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Value, Sentiment, and Quality. Within the same industry, it is ranked #3.
Beyond what is stated above, we’ve also rated TAC for Momentum, Growth, and Stability. Get all TAC ratings here.
Stock #1: Centrica plc (CPYYY)
Based in Windsor, the United Kingdom, CPYYY is an energy services and solutions company that operates through British Gas Services & Solutions; British Gas Energy; Centrica Business Solutions; Bord Gáis Energy; Energy Marketing & Trading; and Upstream segments.
On July 24, Yorkshire Water, an essential water and wastewater services provider for the Yorkshire Region, and CPYYY signed a 15-year agreement to offtake biomethane production and manage shipping, trading, and balancing of production from two plants developed by SGN Commercial Services.
Kristian Gjerløv-Juel, Director for Renewable Energy Trading and Optimisation at Centrica Energy Trading, commented, “This agreement marks an important milestone for Centrica’s biomethane activities in the UK.”
On July 11, CPYYY signed a long-term Sale and Purchase Agreement with Delfin Midstream Inc. for 1.0 million tonnes per annum of Liquefied Natural Gas (LNG) for 15 years.
This deal is worth $8 billion and could provide enough energy to heat 5% of homes in the United Kingdom. This is part of CPYYY’s efforts to build further resilience in the country’s energy security and might reduce the risk of energy shortages.
On August 4, 2023, CPYYY declared a quarterly dividend of $0.07 payable on November 27, 2023. CPYYY pays a dividend of $0.15 per share annually, translating to a 1.67% yield on the current price. Its four-year average dividend yield is 3.43%.
CPYYY’s trailing-12-month gross profit margin of 66.44% is 70.9 higher than the industry average of 38.86%. Its trailing-12-month asset turnover ratio of 1.13x is 6367.8% higher than the industry average of 0.24x.
For the six months that ended June 30, 2023, CPYYY’s group revenue increased 60.1% year-over-year to £16.52 billion ($21.05 billion). Its gross profit amounted to £8.01 billion ($10.21 billion) compared to a gross loss of £274 million ($349.18 million) in the year-ago period.
In addition, its adjusted earnings attributable to shareholders came in at £1.47 billion ($1.87 billion), representing a 127.9% year-over-year increase. Also, its adjusted EPS stood at 25.8p, up 134.5% year-over-year.
For the current year (ending December 2023), CPYYY’s revenue is expected to be $37.65 billion.
CPYYY’s shares have gained 102.11% over the past year and 60.5% year-to-date to close the last trading session at $8.13.
It’s no surprise that CPYYY has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It also has an A grade for Value and Quality and a B for Growth. In the same industry, it is ranked first.
In addition to the POWR Ratings highlighted above, one can access CPYYY’s Momentum, Stability, and Sentiment ratings here.
43 Year Investment Pro Shares Top Picks
Steve Reitmeister is best known for his timely market outlooks & unique trading plans to stay on the right side of the market action. Click below to get his latest insights…
Steve Reitmeister’s Trading Plan & Top Picks >
CPYYY shares were trading at $8.41 per share on Wednesday afternoon, up $0.29 (+3.51%). Year-to-date, CPYYY has gained 87.40%, versus a 17.81% 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.
3 Utility Stocks to Monitor This Week StockNews.com
