The 5 Best Big Utilities of 2014 That Still Have Value in 2015
As we get closer to ringing in the New Year, investors are looking ahead to 2015. The utilities sector has performed strongly over the course of 2014 and makes a good case for investment with a relative cheapness compared to the market. A lot of this decision making concerns how a company is valued and whether it will retain or grow its value over time. Relative to recent closing prices, 24/7 Wall St. has compiled a group of the five best-performing utilities in 2014 that are cheap, on a price-to-earnings basis, going into 2015.
These stocks were evaluated on the basis of future earnings in 2015, against closing prices from Tuesday, December 30.
24/7 Wall St. has included brief color on each stock. We have also included dividend yields, the 52-week trading range and the consensus analyst price target for each.
Huaneng Power International Inc. (NYSE: HNP) was the highest performing utility in 2014, gaining 53% in a growing Chinese market. Seemingly it is positioned very well for 2015, with a relatively cheap outlook and one of the lowest price-to-earnings ratios of the utilities sector at 9. The company generates and sells electricity to the regional and provincial grid companies in China, and as the Chinese economy continues to grow one could speculate that this utility would keep pace. Shares of Huaneng were last trading at $52.76, in a 52-week range of $31.43 to $56.58. The stock has a consensus analyst price target of $51.60. The company has a market cap of about $19 billion, as well as a dividend yield of 4.4%.
Entergy Corp. (NYSE: ETR) is viewed by Merrill Lynch as the second-largest beneficiary of a recent Environmental Protection Agency (EPA) ruling over plant emissions of carbon dioxide. The ruling was more stringent than originally thought for those producers, but the company is insulated as it mainly generates nuclear energy. For the year, the company saw its shares grow about 49%. Shares of Entergy were trading at $89.93, with a forward price-to-earnings ratio of 16. The stock has a 52-week range of $60.40 to $92.02 and a consensus analyst price target of $83.89. The market cap is near $16 billion and the dividend yield is about 4.0%.
Exelon Corp.‘s (NYSE: EXC) merchant generation fleet is also predominantly nuclear. Merrill Lynch sees Exelon as the largest beneficiary of the EPA draft rule of companies under their coverage, given the substantial amount of equity value assigned to the merchant generation business. Shares of Exelon were trading at $38.10, with a price-to-earnings ratio of 15, in a 52-week range of $26.45 to $38.93. Over the course of 2014, the share price grew over 44%. The consensus analyst price target is $37.87. Exelon has a market cap of over $32 billion and a dividend yield of 3.5%.
PG&E Corp. (NYSE: PCG) is one of the largest combined natural gas and electric utilities in the United States. Based in San Francisco, with more than 20,000 employees, the company delivers energy to nearly 16 million people in Northern and Central California. The company operates 141,215 circuit miles of electric distribution lines, 18,616 circuit miles of interconnected transmission lines, 42,141 miles of natural gas distribution pipelines and 6,438 miles of gas transportation pipelines. It operates generation facilities with energy sources such as nuclear, hydroelectric, fossil fuel-fired and photovoltaic. The stock grew roughly 40% in 2014. Shares of PG&E were trading at $54.28, in a 52-week range of $39.42 to $55.24. Looking forward to 2015, PG&E has a price-to-earnings ratio of 15 and a consensus analyst price target of $52.69. It has a market cap of over $25 billion and a dividend yield of 3.5%.
Enersis S.A. (NYSE: ENI) deals mainly in emerging markets, primarily Chile, Brazil, Colombia, Peru and Argentina. In these markets it operates hydroelectric, thermal and wind power plants. It offers a good opportunity to diversify abroad with its relatively cheap forward price-to-earnings ratio of roughly 12. However, relative to the other companies listed, it had not performed as well in 2014, only posting 12% growth. Shares of Enersis were trading at $16.17, in a 52-week range of $13.08 to $17.96. The stock has a consensus analyst price target of $18.82. It has a market cap of roughly $16 billion and a dividend yield of 4.9%.