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Utility stocks rebound after turbulent 2015, beating S&P 500 by wide margin

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Six trends shaping the industries and sectors we cover in 2021

Six trends shaping the industries and sectors we cover in 2021

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Essential Energy Insights - January 2021


Utility stocks rebound after turbulent 2015, beating S&P 500 by wide margin

Utilitystocks rebounded during the 2016 first quarter about continuedvolatility. Investors appeared bullish on utility stocks as evidenced by theS&P 500 Utilities index which beat the broader S&P 500 during theopening months of the year, data compiled by SNL Energy shows.

TheS&P 500 Utilities index was up 14.51% in the first quarter while theS&P 500 was up 0.77%. The Dow Jones Utility index was up 15.71% during the2016 first quarter and so was the SNL Energy index, by 7.18%.

The2016 first quarter was dominated by robust M&A activity and the completion oflong-pending deals. Utilities also released their fourth quarter and full-year2015 earnings with a majority of the largest U.S. utilities either analystexpectations.

Lookingahead, experts do hold a positive view of the regulated utilities sectorincluding MorganStanley, which believes that most companies can achieve 4% to 6%EPS growth through the end of the decade, and possibly longer, driven bylong-term dynamics.

Manyanalysts assert that utilities with simple, strong growth plans and yield,coupled with low exposure to commodity cycles, will look attractive against anumber of factors including: signs of slowing economic growth in China; the oilprice crash reverberating through the exploration and production sector, amongother impacts; and the Federal Reserve's long-anticipated move to begin hikinginterest rates.

Top-performing stocks

— the highestperforming stock during the 2016 first quarter — started the year with anupgrade from RBC Capital Markets LLC to "" and a $3 boost to itsprice target to $55. BMO Capital Markets Corp. also and raised itsper-share target on Black Hills in January by $5 to $54.

Thestock gained 29.51% and closed at $60.13 at the end of the first quarter, datacompiled by SNL Energy shows. Investors rewarded the company for the acquisition ofSourceGas Holdings LLC in a deal valued at nearly $2 billion and lifting its 2016 EPS range to$2.90 to $3.10 from $2.40 to $2.60 previously.

TheSourceGas acquisition added about 429,000 natural gas customers to Black Hills' existing customer baseand at the time of close, the company said it would engage in rebrandingactivities in March.

— which alsocompleted amultibillion dollar acquisition during the quarter — trailed close to BlackHills in terms of per-share price gains.

Thestock was up a little over 29% during the 2016 first quarter to close at $35.86per share. Exelon dominated headlines over its progress in acquiring in a dealvalued at $12.34 billion and announced in 2014. After an , the Public ServiceCommission of the District of Columbia approved the deal in subject to certain terms andconditions.

was among ahandful of companies whose stocks were up over 20% during the 2016 firstquarter, and its stock rose 21.42% to $71.89 from $59.21 per share at the endof 2015.

EdisonInternational reported its fourth quarter and full-year 2015 results inFebruary, beatinganalyst estimates by a wide margin. Fourth-quarter 2015 adjusted core earningsof $287.0 million, or 88 cents per share, beat S&P Global Market Intelligenceconsensus normalized EPS estimate of 58 cents while full-year 2015 adjustedcore earnings of $1.34 billion, or $4.10 per share, beat normalized EPSestimate of $3.79.

and also see furtherearnings growth at Edison International due in part to California's renewable energy targets andinvestments that will be needed to accommodate more distributed generation suchas rooftop solar panels on the electric grid.

Trailingbehind Edison International were UGI Corp., Consolidated Edison Inc., and — all of whichsaw gains in their stock prices of over 19% during the first quarter of theyear.

Other stocks

, and saw smaller gainsduring the first quarter.

TECO,which is in the process of being acquired by Emera Inc., was up 3.3% during the quarter to close at$27.53 per share on March 31, near to what Emera is paying to acquire thecompany: $27.55 per share in cash.

Avangrid was up4.45% during the quarter to close at $40.11 per share on March 31. Analystsremain hopeful forAvangrid's performance during 2016 after 2015 earnings fell .

Cleco— which too is in the process of being acquired — was up 5.75% during the quarter toclose at $55.21 per share on March 31. The company's shares spiked after theLouisiana Public Service Commission approved the acquisition in .

,Portland General ElectricCo., OGE EnergyCorp. and IDACORPInc. were also among the handful of stocks which saw gains of lessthan 10% during the first quarter.

, and each saw gains ofmore than 10% in the quarter.

SNL Energy is a division ofS&P Global Market Intelligence, which is owned by McGraw Hill Financial Inc.