Surging datacenter power demand fuels rally by utility stocks in Q3 2024

Investors flocked to defensive utility stocks in the third quarter, with most of the best-performing utilities unveiling strategies to address the growing power demand in their territories, particularly from datacenter customers.

The utility sector kicked off the quarter on a somewhat flat note but started pulling ahead of the broader S&P 500 index by mid-July.

The S&P 500 Electric Utilities Sub Ind index led the charge with a 19% quarter-over-quarter increase, the S&P 500 Utilities sector was not far behind at 18.5%, and the Dow Jones Utility index closed with a 16.9% hike.

The broader S&P 500 index managed a 5.5% gain, by comparison.

Leading the pack, Constellation Energy Corp. saw its share price jump 29.8% to $260.02 during the third quarter.

Constellation shares surged Sept. 20 after the announcement of a 20-year power contract with Microsoft Corp., which will facilitate the restart of Three Mile Island unit 1 nuclear plant in Pennsylvania.

Entergy Corp. logged a third-quarter share price increase of 23% to $131.61.

Subsidiary Entergy Mississippi LLC plans to build a new gas-fired plant to replace a 727.7-MW single-unit, gas- and oil-fired generating station that began operation in 1975.

Ameren Corp. shares also leaped 23% to close the quarter at $87.46. Ameren has more than 335 MW of new load under agreement, primarily driven by manufacturing growth and new datacenters across its service territories, management said Aug. 2.

WEC Energy Group Inc. executives said July 31 that the company will seek approval to develop additional renewable energy capacity in Wisconsin to accommodate economic development, including a new Microsoft datacenter.

The utility saw a stock price gain of 22.6% to end the quarter at $96.18.

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Xcel Energy Inc. posted a 22.3% share price increase to $65.30.

Xcel executives said Aug. 2 that a 6.7-GW pipeline of datacenter load requests could boost the company's annual sales growth from that sector alone to over 9% if all requests come to pass.

Edison International posted a 21.3% gain to $87.09 as the company revised a 10-year power demand forecast for its Southern California service territory.

Public Service Enterprise Group Inc., whose stocks rose 21% to $89.21, does not anticipate needing to tap state and federal incentives once its nuclear plants sign firm contracts with datacenter customers, executives said July 30.

Joining the top-performing roster with share price gains of more than 20% were Brookfield Infrastructure Partners LP MGE Energy Inc. and NiSource Inc.

Only two utility stocks posted share price declines in the third quarter.

Otter Tail Corp. led the sell-off with a 10.8% stock price decrease to $78.16. The utility on Aug. 5 increased its 2024 diluted earnings per share guidance to a range of $6.77 to $7.07, from the previous range of $6.23 to $6.53, primarily due to continued strength in the plastics segment.

CenterPoint Energy Inc. shares slid 5% to $29.42. The Texas attorney general launched a fraud investigation into CenterPoint in August, after a series of lengthy blackouts in the Houston area this spring and summer.

CenterPoint's Houston utility also filed to withdraw its pending rate case and system resiliency plan before Texas regulators.

Hawaiian Electric Industries Inc. closed the quarter with a 7.3% share price increase to $9.68.

The utility reported a $1.71 billion pretax loss for the second quarter to settle claims by plaintiffs in over 600 lawsuits that name the company and its utility subsidiaries in relation to a wildfire that ravaged Maui one year ago.

Even lesser-performing utility stocks logged double-digit percentage gains, including: Sempra Idacorp Inc., Portland General Electric Co., Avista Corp. and Black Hills Corp.