Although inflation showed signs of cooling off, it is still at sky-high levels, and the Fed is expected to stay put with its interest rate hikes, raising concerns of a recession. Moreover, the Treasury yield curve inverted to -29.7 basis points earlier this week, signaling that recession bets have increased.
“The inverted yield curve is signaling a massive ‘recession’ is upon us,” said Tom di Galoma, managing director at Seaport Global Holdings, in a note to investors. “Yield curve inversions are great predictors of recessions.”
The utilities sector tends to perform well during recessions and economic downturns due to relatively inelastic demand for its services and is known for its defensive nature. These stocks serve as a defensive hedge amid recessionary pressures.
Additionally, attractive dividend payouts make these stocks attractive buying options. We think investors should consider buying utilities stocks, Avangrid, Inc. (AGR), Brookfield Infrastructure Corporation (BIPC), Portland General Electric Company (POR), Unitil Corporation (UTL), and Genie Energy Ltd. (GNE) amid these uncertain times.
Avangrid, Inc. (AGR)
AGR, an energy services holding company, engages in regulated energy transmission and distribution and renewable energy generation businesses in the United States. It operates through Networks; and Renewables segments.
On August 3, AGR announced its agreement to provide operations and management services for Vineyard Wind 1, an 800-megawatt first commercial offshore wind project in the United States. AGR is well positioned to maximize the operation and performance of the historic project, which should prove to be strategically beneficial for the company.
AGR’s trailing-12-month revenues came in at $7.46 billion. Also, its trailing-12-month net income stood at $904 million, while its operating income was $891 million.
The consensus revenue estimate of $7.20 billion for the fiscal year ending December 2022 indicates an increase of 3.3% year-over-year. Also, the company’s EPS is expected to grow 4.1% year-over-year to $2.27 in the same period.
AGR gained 12.8% over the past six months to close the last trading session at $50.67.
AGR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
AGR also has a B grade in Growth, Momentum, and Stability. It is ranked #4 of 66 stocks in the Utilities - Domestic industry.
Beyond what is stated above, we’ve also rated AGR for Value, Sentiment, and Quality. Get all the AGR ratings here.
Brookfield Infrastructure Corporation (BIPC)
BIPC owns and operates regulated natural gas transmission systems in Brazil. The company also engages in gas and electricity distribution operations in the United Kingdom and Australia.
On August 23, BIPC signed a definitive agreement with Intel Corporation (INTC) to jointly fund Intel’s under-construction semiconductor fabrication facility to support its manufacturing capabilities. Assisting a leading company like Intel highlights BIPC’s strong positioning in the industry and robust capital structure.
For the fiscal quarter ended June 30, 2022, BIPC’s revenues increased 38.2% year-over-year to $3.68 billion. Its cash from operating activities grew 30.1% from the year-ago value to $734 million, while its cash and cash equivalents balance stood at $1.30 billion, reflecting a 2% increase year-over-year in the same period.
Street expects BIPC’s revenue for the ongoing fiscal year to come in at $6.11 billion. In the same period, its FFO per share is expected to improve 13.3% year-over-year to $2.75.
BIPC’s shares have gained 13.5% over the past month to close the last trading session at $49.70.
BIPC’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to Strong Buy in our rating system.
The company has a B in Quality, Stability, Momentum, and Growth. The stock is ranked #2 in the Utilities - Domestic industry. To get BIPC’s ratings for Value and Sentiment, click here.
Portland General Electric Company (POR)
POR, an integrated electric utility company, engages in generating, wholesale purchasing, transmitting, and selling electricity in the state of Oregon. It operates six thermal plants, three wind farms, and seven hydroelectric facilities.
POR’s total revenues increased 10.1% year-over-year to $591 million in the fiscal quarter ended June 30, 2022. Its net income grew 100% from the year-ago value to $64 million, while its EPS also improved by 100% year-over-year to $0.72.
POR’s revenue for the fiscal year ending December 2022 is expected to improve 1.3% year-over-year to $2.43 billion. The consensus EPS estimate of $2.80 for the same quarter indicates an increase of 3.1% year-over-year.
POR’s shares have gained 10.9% over the past three months to close the last trading session at $53.65.
The company has an overall rating of B, translating to Buy in our proprietary rating system. POR is also rated B in Momentum.
Within the same industry, it is ranked #3. Click here to see additional POWR Ratings for Stability, Value, Quality, Growth, and Sentiment for POR.
Unitil Corporation (UTL)
UTL, a public utility holding company, distributes electricity and natural gas through its segments Utility Electric Operations; Utility Gas Operations; and Non-Regulated.
UTL’s total operating revenue increased 2.3% year-over-year to $98.90 million in the fiscal quarter ended June 30, 2022. Its adjusted gross margin improved 5.1% year-over-year to $51.80 million over the period, while its net income and EPS increased 81.5% and 66.7% from its year-ago values to $4.90 million and $0.30, respectively.
Analysts expect UTL’s revenue for the fiscal quarter ending September 2022 to come in at $100.29 million, indicating a 2.2% increase year-over-year. UTL also beat the consensus EPS estimates in three of the trailing four quarters, which is impressive.
The stock has gained 29.1% over the past nine months to close the last trading session at $55.26.
It is no surprise that UTL has an overall rating of B, equating to Buy in our POWR Ratings system. The stock also has a B grade in Momentum. Within the Utilities - Domestic industry, it is ranked #5.
In addition to the POWR Rating grades I’ve just highlighted, you can see the UTL’s ratings for Value, Quality, Growth, 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. The company operates in three segments Genie Retail Energy (GRE); GRE International; and Genie Renewables.
GNE’s income from operations increased 968.7% year-over-year to $48.50 million in the fiscal second quarter of 2022. Its net income grew 577.5% from the year-ago value to $33.90 million, while its EPS increased 584.2% year-over-year to $1.30. Also, its adjusted EBITDA came in at $49.10 million, up 798.2% from the prior-year quarter.
The stock has gained 114.4% over the past nine months to close the last trading session at $10.89. It gained 95.5% year-to-date.
GNE’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, translating to Strong Buy in our proprietary rating system.
GNE is also rated A in Value and a B in Momentum, Sentiment, and Quality. The stock is ranked #1 in the Utilities - Domestic industry. Click here to see additional POWR Ratings for Growth and Stability for GNE.
AGR shares were trading at $50.01 per share on Friday afternoon, down $0.66 (-1.30%). Year-to-date, AGR has gained 2.19%, versus a -13.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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