5 Utility Stocks That Escaped The Sector Underperformance In 2019

The Zacks Utilities sector has gained 4% in the year-to-date period compared with the S&P 500’s rally of 26%.

The performance of the S&P 500 group was far better than that of the utilities. Utilities have gained 15.5% in the last decade compared with 187.1% rally of the S&P 500. However, their steady performance and ability to pay regular dividends make utilities an attractive investment option.

From December 2015 to this July, the capital-intensive sector had to bear the impact of nine rate hikes. Rate decline in July was followed by two more rate cuts by the Federal Reserve. The rate currently stands in the range of 1.5-1.75%. Utilities took this opportunity to refinance their existing high interest bearing long-term debts with proceeds from lower interest bearing debts.

Demand for electricity, natural gas and water supplied by the utilities does not change drastically (except seasonal variation in weather conditions), which is the reason behind their consistent performance. Markedly, increase in prices of the services offered by the regulated utilities is controlled by regulators that also keep a check on their profitability.

We notice a steady transition in the utility space, with more emphasis being provided on cleaner electricity generation. Utilities are making full use of the new technological advancement to develop and maintain their infrastructure for providing quality services to customers.

Over the long term, proper cost management, new rates and customer growth should continue to help players in this space to maintain their steady performance. The utilities also need to abide by the stringent rules and government policies, which increase cost of operations.

Per International Monetary Fund report, decline in global manufacturing and rising trade barriers had an adverse impact on global growth, which is forecast to be 3% in 2019.

Amid such global uncertainty, it is advisable for investors to look for safer investment options in the United States. Let’s focus on some Utility stocks that have outperformed its sector in 2019.

Utilities Worth Adding to Your Portfolio for 2020

Finding utility stocks with the correct combination for 2020 could be a daunting task. Here, Zacks’ proprietary Stock Screening Tool comes handy. We have selected utilities that carry a Zacks Rank #2 and have a market capitalization of more than $5 billion.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Price Performance

The AES Corporation (NYSE:AES) : This Arlington, VA-based company operates as a diversified power generation and utility company. The Zacks Consensus Estimate for its 2020 EPS has moved up 2.1% over the past 60 days. Year to date, the stock has gained 35.2%.

FirstEnergy Corporation (NYSE:FE) : This Akron, OH-based company — through its subsidiaries — generates, transmits and distributes electricity in the United States. The Zacks Consensus Estimate for 2020 EPS has moved up 0.8% over the past 60 days. Year to date, the stock has gained 29.7%.

MDU Resources Group, Inc. (NYSE:MDU) : The Bismarck, ND-based firm engages in regulated energy delivery, and construction materials and services businesses in the United States. The Zacks Consensus Estimate for 2020 EPS has moved up 6.3% over the past 60 days. Year to date, the stock has gained 23.7%.

Atmos Energy Corporation (NYSE:ATO) : This Dallas, TX-based company — together with its subsidiaries — engages in regulated natural gas distribution, and pipeline and storage businesses in the United States. The Zacks Consensus Estimate for fiscal 2020 EPS has moved up 0.6% over the past 60 days. Year to date, the stock has gained 19.5%.

Alliant Energy Corporation (NASDAQ:LNT) : The Madison, WI-based company operates as a utility holding company that provides regulated electricity and natural gas services in the Midwest region of the United States. The Zacks Consensus Estimate for 2020 EPS has moved up 0.4% over the past 60 days. Year to date, the stock has gained 28.3%.

Zacks Top 10 Stocks for 2020

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.

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