With the world moving towards a more sustainable energy future, electric grid companies are playing a critical role in modernizing every nation’s power delivery system. Companies in this sector focus on upgrading transmission networks, integrating renewable energy, and improving grid resilience against climate-related disruptions.
Given the industry’s tailwinds, investors might consider keeping an eye on three well-positioned electric grid stocks: Exelon Corporation (EXC), American Electric Power Company, Inc. (AEP), and Edison International (EIX) for potential gains.
The demand for electricity is soaring with the growing urban population and increasing load from Electric Vehicles (EVs) and data centers. This requires upgrading decade-old electric grids prevailing within the country. Hence, utility companies and grid operators are investing in smart grids, battery storage, and high-voltage transmission lines to enhance efficiency and reliability.
The rapid growth of wind and solar power requires modern grids that efficiently distribute intermittent energy. As per reports, renewable power generation is set to increase 12% in the United States to 1,058 billion kWh in 2025 and increase a further 8% to 1,138 billion kWh in 2026. Moreover, the global utilities market is anticipated to reach $8.83 trillion by 2028 at a CAGR of 6.4%.
Considering these positive trends, let’s delve deeper into three above-mentioned Utilities - Domestic stocks:
Stock #3: Exelon Corporation (EXC)
EXC is a utility services holding company, engaged in the energy distribution and transmission businesses in the United States and Canada. The company is involved in the purchase and regulated retail sale of electricity and natural gas, transmission and distribution of electricity, and distribution of natural gas to retail customers.
On December 13, the company paid a quarterly dividend of $0.38 per share. EXC pays an annual dividend of $1.52 per share, which translates to a yield of 3.75% on the prevailing share price. The company’s dividend payouts have increased at impressive CAGRs of 11.7% and 8% over the past three and five years, respectively. Also, its four-year average dividend yield is 3.18%.
In the fiscal third quarter that ended on September 30, 2024, EXC’s total operating revenues increased 2.9% year-over-year, amounting to $6.15 billion. The company reported an operating income of $1.19 billion, indicating a 6.5% growth from the prior-year quarter. Its adjusted operating earnings came in at $708 million and $0.71 per share, up 5.5% and 6% year-over-year.
Street expects EXC’s revenue for the fiscal first quarter (ending March 2025) to increase marginally year-over-year to $6.10 billion. Its EPS for the same period is expected to register a 3% growth from the prior year, settling at $0.70. In addition, it surpassed the consensus revenue estimates in each of the trailing four quarters, which is impressive.
Moreover, EXC’s net income has grown at CAGRs of 13.2% and 1% over the past three and five years, respectively. In addition, its EBIT increased at 14.1% CAGR over the past three years.
EXC shares have surged 18% over the past year and 8.4% over the past nine months to close the last trading session at $40.54.
EXC’s stance is apparent in its POWR Ratings. The stock has a B grade for Momentum. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Among the 58 stocks in the Utilities - Domestic industry, it is ranked #32. Click here to see the EXC ratings (Growth, Value, Stability, Sentiment, and Quality).
Stock #2: American Electric Power Company, Inc. (AEP)
AEP is an electric public utility holding company that operates in the generation, transmission, and distribution of electricity for sale to retail and wholesale customers. The company operates through four segments: Vertically Integrated Utilities; Transmission and Distribution Utilities; AEP Transmission Holdco; and Generation & Marketing.
On January 21, buoyed by strong financial performance, the company declared its quarterly dividend of $0.93 per share to its shareholders, payable on March 10, 2025, to shareholders of record on February 10, 2025.
With 15 years of consecutive dividend growth, AEP pays an annual dividend of $3.72, which translates to a yield of 3.74% at the current share price. Its four-year average dividend yield is 3.63%. Moreover, the company’s dividend payouts have increased at an impressive CAGR of 5.9% over the past three years.
AEP’s revenues for the third quarter (ended September 30, 2024) increased 1.9% year-over-year to $5.4 billion. The company’s non-GAAP operating earnings stood at $985.40 million and $1.85 per share, up 6.7% and 4.5% over the prior year’s quarter, respectively.
Analysts expect AEP’s revenue for the first quarter (ending March 2025) to increase 9.9% year-over-year to $5.49 billion, while its EPS for the same period is expected to grow 12.6% from the prior year to $1.43. Moreover, it topped Street EPS estimates in three of the trailing four quarters, which is promising.
Over the past three and five years, AEP’s revenue grew at CAGRs of 6.3% and 4.5%, respectively, while its total assets grew at 6.3% CAGR over the past five years.
The stock has gained 24.5% over the past year and 10.5% over the past nine months to close the last trading session at $97.88.
AEP’s POWR Ratings reflect this outlook. It has a B grade for Growth and Momentum and is ranked #5 out of 58 stocks in the same industry. To see the other ratings of AEP for Value, Stability, Sentiment, and Quality, click here.
Stock #1: Edison International (EIX)
EIX engages in the generation and distribution of electric power. The company provides electricity across a 50,000-square-mile area in Southern California, serving residential, commercial, and industrial sectors.
On January 31, demonstrating its commitment to returning value to shareholders, the company paid a quarterly dividend of $0.8275 per share. EIX pays an annual dividend of $3.31, which translates to a yield of 6.40% at the current share price. Its four-year average dividend yield is 4.26%. Its dividend payouts have increased at an impressive CAGR of 5.6% over the past three years.
For the third quarter, which ended September 30, 2024, EIX’s operating revenue increased 10.6% year-over-year to $5.20 billion. The company’s operating income was $995 million, up 102.2% from the year-ago value. In addition, EIX’s net income and EPS available were $516 million and $1.32, respectively, representing increases of 232.9% and 230% from the prior year’s period.
The consensus revenue estimate of $4.39 billion for the fiscal fourth quarter (ending March 2025) represents a 7.7% increase year-over-year. The consensus EPS estimate of $1.26 for the same quarter indicates a 10.6% improvement year-over-year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
EIX’s EBITDA has grown at CAGRs of 6.9% and 10.9% over the past three and five years, respectively. Likewise, the company’s diluted EPS has increased at a CAGR of 19.4% over the past three years.
Over the intraday, the stock has declined marginally, closing the last trading session at $51.72.
EIX’s fundamentals are reflected in its POWR Ratings. The stock has a B grade for Growth, Momentum, and Sentiment. It is ranked #3 in the Utilities - Domestic industry.
Beyond what is stated above, we’ve also rated EIX for Value, Stability, and Quality. Get all EIX’s ratings here.
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AEP shares were trading at $99.71 per share on Wednesday afternoon, up $1.83 (+1.87%). Year-to-date, AEP has gained 8.11%, versus a 2.94% rise in the benchmark S&P 500 index during the same period.
About the Author: ShreyaRathi
