4 Electric Power Stocks to Consider Amid Industry Weaknesses

Core Viewpoint - The Electric Power industry is transitioning towards cleaner energy sources, supported by government initiatives, while also focusing on infrastructure resilience to mitigate the impacts of natural disasters [1][5]. Industry Overview - The Utility – Electric Power industry encompasses the generation, transmission, distribution, storage, and sale of electricity, with a significant portion of earnings derived from regulated operations [3]. - Demand for electricity remains stable across economic cycles, with seasonal weather variations influencing consumption [3]. - The industry is witnessing a shift towards zero-emission goals, driven by increasing electricity demand from global internet usage and anticipated growth in artificial intelligence [3]. Industry Trends - Interest Rate Decline: The Federal Reserve's recent rate cuts have reduced benchmark rates by 100 basis points to a range of 4.25-4.50%, benefiting capital-intensive utilities planning infrastructure investments [4]. - Transition to Cleaner Energy: The share of U.S. electricity generation from renewable sources is projected to rise from 23% in 2024 to 27% by 2026, aided by the Inflation Reduction Act [5]. - Rising Demand and Prices: U.S. electricity supply is expected to increase by 2% in 2025 and 1% in 2026, with residential electricity prices projected to average 16.94 cents per kWh in 2025, a 2.7% increase from 2024 [6]. Industry Performance - The Utility Electric Power industry has gained 21.6% over the past 12 months, outperforming its sector's 15.7% increase but lagging behind the S&P 500's 24.2% gain [10]. - The industry is currently trading at an EV/EBITDA of 14.01X, lower than the S&P 500's 17.7X and the Utility sector's 14.19X, indicating a discount compared to historical valuations [12]. Company Highlights - Vistra Corp. (VST): Plans to invest nearly $2.22 billion in 2025, with a long-term earnings growth rate of 23.05$38 billion from 2025 to 2028, with a current dividend yield of 3.55% and a long-term earnings growth rate of 5.71% [20][21]. - Entergy Corporation (ETR): Plans to deploy approximately $37 billion from 2025 to 2028, with a long-term earnings growth rate of 8.4$26.3 billion from 2025 to 2029, with a long-term earnings growth rate of 6.6% [24][25].