As the winter approaches, the utility sector is an attractive investment opportunity due to its stable performance during colder months. Therefore, investors might want to scoop up shares of utility stocks such as Centrica plc (CPYYY), Brookfield Infrastructure Corporation (BIPC), and Pampa Energía S.A. (PAM), for potential growth and performance.
However, demand for utilities, which includes electricity, gas, and water companies, traditionally rises as households and businesses rely more on heating. This seasonal spike in consumption makes the sector more appealing to investors.
In the month of August, consumer spending (PCE) in the nation increased by 0.2% monthly, whereas in the year 2023, housing and utilities were one of the largest contributors to the increase in consumer spending, increasing by 7.5%.
In the upcoming years, the utilities market is expected to grow rapidly. The utilities market is set to reach $8.83 trillion by 2028, exhibiting a CAGR of 6.4%. The growth factors for this sector are likely to be emerging technologies, expanding mergers and acquisitions, and a growing population.
Considering these conducive trends, let’s look at the fundamentals of the above-mentioned stocks in detail:
Centrica plc (CPYYY)
Headquartered in Windsor, the United Kingdom, CPYYY operates as an integrated energy company internationally. The company operates through six segments: British Gas Services & Solutions; British Gas Energy; Centrica Business Solutions; Bord Gáis Energy; Centrica Energy; and Upstream.
On September 16, CPYYY agreed to acquire nine ‘ready to build’ battery energy storage projects (BESS) in Sweden with a total capacity of over 100 MW from Fu-Gen AG. This acquisition helps CPYYY increase its investments as a green-focused, flexible energy solutions provider company and strengthens its position in the European market.
On September 12, CPYYY enters into an agreement with European Energy to take responsibility for managing two wind farms, the Telsiai I and Telsiai II, and one solar farm, Anyksciai, for them. This agreement increases wind and solar AUM in CPYYY’s diversified portfolio, and it continues to gain momentum in the Baltic markets.
For the six-month period that ended June 30, 2024, CPYYY posted total group revenue of £10.54 billion ($13.74 billion), while the Upstream segment reported total group revenue of £1.02 billion ($1.33 billion), indicating a 42% growth from the prior-year period. In addition, its group operating profit was £1.68 billion ($2.19 billion). The company’s profit for the period came in at £1.35 billion ($1.76 billion), and its EPS was 24.60 pence.
CPYYY’s stock has surged 6.9% over the past month to close the last trading session at $6.62.
CPYYY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CPYYY has an A grade for Value and a B for Momentum, Sentiment, and Quality. It is ranked first out of 50 stocks in the B-rated Utilities - Foreign industry. Click here to see the additional ratings for CPYYY (Growth and Stability).
Brookfield Infrastructure Corporation (BIPC)
BIPC is a global infrastructure company that owns and operates regulated natural gas transmission systems in Brazil. It engages in regulated gas and electricity distribution operations in the United Kingdom, electricity transmission and distribution, and gas distribution in Australia.
On September 27, BIPC paid a quarterly distribution of $0.41 per unit. BIPC’s annual dividend of $1.62 equates to a yield of 3.71% at the current share price. Its four-year average dividend yield is 3.52%. And the company’s dividend payouts have increased at a CAGR of 5.9% over the past three years.
BIPC’s revenue for the second quarter (ended June 30, 2024) increased 68.8% year-over-year to $908 million. Its income before income tax came in at $742 million compared to a year-ago net loss of $59 million. The company’s net income stood at $643 million versus a loss of $154 million last year. Also, BIPC’s FFO stood at $608 million and $0.77 per unit, up 10.1% and 6.9% year-over-year, respectively.
Analysts expect BIPC’s revenue for the fiscal year (ending December 2024) to increase 7.4% year-over-year to $15.50 billion, while its FFO for the same period is expected to grow 9.6% from the prior year’s period to $2.97.
Over the past six months, the stock has surged 45.9%, closing the last trading session at $43.63.
BIPC’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It also has a B grade for Growth, Momentum, and Quality. Within the Utilities - Domestic industry, it is ranked first out of 59 stocks. Click here to see BIPC’s ratings for Value, Stability, and Sentiment.
Pampa Energía S.A. (PAM)
Based in Buenos Aires, Argentina, PAM is an integrated power company engaged in the generation, transmission, and distribution of electricity. The company operates through four segments: Electricity Generation; Oil and Gas; Petrochemicals; and Holding and Other Business.
On August 30, PAM indirectly acquired 36% of the share capital and voting rights of Oleoducto de Crudos Pesados Ecuador S.A. (OCP Ecuador) for $23 million. This acquisition will allow PAM to expand its oil pipeline across the Andes and Amazon region, expanding to 485 kilometers and strengthening its transportation of average barrels per day.
In the second quarter that ended on June 30, 2024, PAM reported sales revenue of $500 million, up 304.6% year-over-year. The company’s gross profit came in at $193 million, reflecting an increase of 305.6% from the prior year. In addition, its adjusted net income amounted to $99 million.
The consensus revenue estimate of $1.97 billion for the fiscal year (ending December 2024) represents a 223.7% increase year-over-year. The consensus EPS estimate of $7.78 for the same quarter indicates a significant improvement year-over-year.
The stock has gained 61.5% over the past six months and 55.8% over the past year to close the last trading session at $67.63.
It’s no surprise that PAM has an overall rating of B, equating to a Buy in our POWR Ratings system. It has a B grade for Momentum. Out of 50 stocks in the Utilities - Foreign industry, PAM is ranked #13.
Beyond what is stated above, we’ve also rated PAM for Growth, Value, Stability, Sentiment, and Quality. Get all PAM’s ratings here.
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CPYYY shares closed at $6.62 on Friday, up $0.16 (+2.40%). Year-to-date, CPYYY has declined -6.23%, versus a 24.15% 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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