In this article, we discuss 11 high growth utility stocks to buy. If you want to see more stocks in this selection, check out 5 High Growth Utility Stocks to Buy.
The US utilities industry in 2023 aims to provide reliable, affordable, and sustainable energy or safe water to customers, but face challenges in balancing the energy equation due to pressure around decarbonization, cleaner energy adoption, electrification, infrastructure needs, and customer-driven disruption.
The electric power sector faced both risks and opportunities in 2022. US electricity sales increased by 3.6% in the first eight months compared to the previous year, as the pandemic recovery progressed. However, costs rose significantly due to natural gas prices more than doubling, which was caused by global shortages worsened by Russia’s invasion of Ukraine. Extreme weather events such as droughts, hurricanes, heat waves, and wildfires also continued to test the resilience of the regional power grids. To address these challenges, the industry and policymakers worked to increase reserves, deploy energy storage and microgrids, strengthen infrastructure, and enhance flexible load options. In 2023, despite the challenges faced by the US utilities industry, the emergence of new technologies and supportive policies could present opportunities and aid the industry in achieving its objectives.
The Inflation Reduction Act of the Biden administration, worth $430 billion, includes funding for tax credits and direct payments to promote the adoption of solar, wind, battery, and other energy sources and facilitate the transition of the electric power industry away from fossil fuels. Large American electric utility firms specializing in renewable power projects will be the biggest beneficiaries from the federal clean energy funding.
Emily Beagle, research associate at Webber Energy Group at the University of Texas at Austin, noted that the location of utility companies will determine how much they stand to gain from the Inflation Reduction Act. Solar projects in sunnier states of the South and Southwest and wind projects in the Midwest are likely to gain the highest IRA budget, she said.
Some of the best utility stocks to invest in include NextEra Energy, Inc. (NYSE:NEE), Duke Energy Corporation (NYSE:DUK), and Dominion Energy, Inc. (NYSE:D). However, in this article we discuss the best high growth utility stocks to buy.
Our Methodology
We used a stock screener and filtered for utility companies with year-over-year quarterly revenue growth of more than 30%. From the resultant dataset, we selected the utility stocks with the highest revenue growth rates as of the end of the third and fourth quarter of 2022, according to the latest data available for each firm. The list is arranged in ascending order of the year-over-year quarterly revenue growth rate.
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High Growth Utility Stocks to Buy
11. Eversource Energy (NYSE:ES)
Number of Hedge Fund Holders: 30
Quarterly Revenue Growth YoY as of September 29, 2022: 32.20%
Eversource Energy (NYSE:ES) is a Massachusetts-based public utility holding company specializing in the energy delivery business. The company operates through Electric Distribution, Electric Transmission, Natural Gas Distribution, and Water Distribution segments. On February 1, Eversource Energy (NYSE:ES) declared a $0.675 per share quarterly dividend, a 5.9% increase from its prior dividend of $0.637. The dividend is payable on March 31, to shareholders of record on March 2.
On January 24, Evercore ISI analyst Durgesh Chopra upgraded Eversource Energy (NYSE:ES) to Outperform from In Line, with a price target of $92, up from $86. The analyst rolled out its 2025 EPS forecasts, while also updating 12-month price targets for the firm’s Power & Utilities coverage. The analyst remains bullish on the sector but is now cautious entering 2023, expecting a reversal of last year’s outperformance, as the group is considered expensive both absolutely and relatively to bond yields and the S&P 500.
According to Insider Monkey’s third quarter database, 30 hedge funds were long Eversource Energy (NYSE:ES), compared to 32 funds in the prior quarter. GLG Partners is the biggest stakeholder of the company, with 1.6 million shares worth $130.5 million.
In addition to NextEra Energy, Inc. (NYSE:NEE), Duke Energy Corporation (NYSE:DUK), and Dominion Energy, Inc. (NYSE:D), Eversource Energy (NYSE:ES) is one of the top utility stocks to monitor.
10. The Southern Company (NYSE:SO)
Number of Hedge Fund Holders: 31
Quarterly Revenue Growth YoY as of September 29, 2022: 34.30%
The Southern Company (NYSE:SO) was incorporated in 1945 and is headquartered in Atlanta, Georgia. The company engages in the generation, transmission, and distribution of electricity. It operates through Gas Distribution Operations, Gas Pipeline Investments, Wholesale Gas Services, and Gas Marketing Services segments. The Southern Company (NYSE:SO) is one of the most prominent high growth stocks to invest in. On January 20, the company declared a $0.68 per share quarterly dividend, in line with previous. The dividend is payable on March 6, to shareholders of record on February 21.
On January 18, Credit Suisse analyst Nicholas Campanella raised The Southern Company (NYSE:SO)’s price target to $70 from $60 as he reviewed investment drivers for the company and provided his 2023 preview, where he expects flat EPS growth YoY compared to 2022. The growth will be impacted by financing costs, a reversal of favorable weather and usage, GP’s rate settlement with backend-weighted revenue requirements, and dilution from the 2022 convert. Despite the price target increase, the analyst maintained an Underperform rating on the shares.
According to Insider Monkey’s data, 31 hedge funds were bullish on The Southern Company (NYSE:SO) at the end of Q3 2022, compared to 29 funds in the last quarter. Jim Simons’ Renaissance Technologies is the largest stakeholder of the company, with 3.06 million shares worth $208.2 million.
9. National Grid plc (NYSE:NGG)
Number of Hedge Fund Holders: 14
Quarterly Revenue Growth YoY as of September 29, 2022: 36.10%
National Grid plc (NYSE:NGG) is a London-based company that transmits and distributes electricity and gas. The company operates through UK Electricity Transmission, UK Electricity Distribution, UK Electricity System Operator, New England, and New York segments. National Grid plc (NYSE:NGG) is one of the top high growth utility stocks to buy, with quarterly year-over-year revenue growth of 36.1% as of September 29, 2022.
On February 13, RBC Capital analyst Alexander Wheeler reinstated coverage of National Grid plc (NYSE:NGG) with an Outperform rating and a price target of 1,250 GBp following the completion of the gas transmission sale. The analyst listed National Grid plc (NYSE:NGG)’s “highly visible” growth, continued ability to outperform, and attractive valuation as reasons for the positive view. He believes that the market should give more credit to National Grid plc (NYSE:NGG)’s lower-risk growth profile.
According to Insider Monkey’s Q3 data, 14 hedge funds were long National Grid plc (NYSE:NGG), compared to 10 funds in the preceding quarter. Israel Englander’s Millennium Management is a prominent position holder in the company, with 320,578 shares worth $16.5 million.
Here is what ClearBridge Investments SMID Cap Growth Strategy has to say about National Grid plc (NYSE:NGG) in its Q4 2021 investor letter:
“National Grid is one of the world’s largest publicly owned utilities, focused on transmission and distribution activities in electricity and gas. National Grid performed strongly during the quarter as the business continued to de-risk following prior regulatory decisions and significant M&A. The company also benefited from falling real rates, a solid set of half-year results and strong Investor Day presentations.”
8. Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Holders: 54
Quarterly Revenue Growth YoY as of September 29, 2022: 37.30%
Constellation Energy Corporation (NASDAQ:CEG) is headquartered in Baltimore, Maryland, and it generates and sells electricity in the United States. The company operates through five segments – Mid-Atlantic, Midwest, New York, ERCOT, and Other Power Regions. It is one of the best high growth utility stocks to monitor, with year-over-year quarterly revenue growth of 37.30% as of September 29, 2022.
On January 31, Wells Fargo analyst Neil Kalton raised Constellation Energy Corporation (NASDAQ:CEG)’s price target to $115 from $106 and maintained an Overweight rating on the shares. The analyst believes there are multiple paths for value-added cash deployment and expects the Q4 update to provide more insight into the company’s approach to capital allocation. Wells Fargo recommends buying the stock on recent weakness.
According to Insider Monkey’s data, 54 hedge funds were long Constellation Energy Corporation (NASDAQ:CEG) at the end of September 2022, compared to 43 funds in the prior quarter. John Smith Clark’s Southpoint Capital Advisors is the biggest stakeholder of the company, with 3.50 million shares worth $291 million.
Alger Capital made the following comment about Constellation Energy Corporation (NASDAQ:CEG) in its Q3 2022 investor letter:
“Constellation Energy Corporation (NASDAQ:CEG) is America’s leading clean energy company, based on carbon-free production. The company is the largest supplier of clean energy and sustainable solutions to homes, businesses, governments, community aggregations, and a range of wholesale customers (such as municipalities, cooperatives, and other end markets) across the continental U.S., backed by approximately 32,400 megawatts of generating capacity consisting of nuclear, wind, solar, natural gas and hydroelectric assets. Constellation produces nearly 10% of the nation’s carbon-free energy.
Shares outperformed during the third quarter primarily due to the Inflation Reduction Act (IRA). Signed into law in august, the bill provides a nuclear production tax credit of approximately $43.75 per megawatt hour of energy generated. This credit favorably impacted earnings, resulting in an increase in Constellation’s share price.”
7. DTE Energy Company (NYSE:DTE)
Number of Hedge Fund Holders: 30
Quarterly Revenue Growth YoY as of December 30, 2022: 41.30%
DTE Energy Company (NYSE:DTE) was founded in 1903 and is headquartered in Detroit, Michigan. It is a utility company that operates through Electric, Gas, Power and Industrial Projects, and Energy Trading segments. On February 2, DTE Energy Company (NYSE:DTE) declared a $0.9525 per share quarterly dividend, in line with previous. The dividend is payable on April 15, to shareholders of record on March 20. DTE Energy Company (NYSE:DTE) is one of the prominent high growth stocks to consider buying.
On December 14, Wells Fargo analyst Neil Kalton raised DTE Energy Company (NYSE:DTE)’s price target to $138 from $128, citing higher peer group multiples since his last update. The analyst maintained an Overweight rating on the shares. While his outlook for the sector is not as bullish heading into 2023, he is not outright bearish either.
According to Insider Monkey’s data, 30 hedge funds were bullish on DTE Energy Company (NYSE:DTE) at the end of Q3 2022, compared to 29 funds in the earlier quarter. Michael Gelband’s ExodusPoint Capital is a significant position holder in the company, with 663,246 shares worth $76.3 million.
6. PPL Corporation (NYSE:PPL)
Number of Hedge Fund Holders: 28
Quarterly Revenue Growth YoY as of December 30, 2022: 41.10%
PPL Corporation (NYSE:PPL) is a Pennsylvania-based utility holding company that provides electricity and natural gas in the United States and the United Kingdom. On January 11, the company announced that it expects to generate annual earnings and dividend growth in the 6% to 8% range by 2026, and aims to increase its next quarterly stock dividend by 7% to $0.24 per share.
On January 18, Barclays analyst Anthony Linton started coverage of PPL Corporation (NYSE:PPL) with an Equal Weight rating and a C$52 price target. The analyst has also initiated coverage of the Canadian oil and gas space with a Positive view. He is optimistic on producers who are well-positioned in a volatile environment. In addition, the analyst has a cautious but positive view on midstream names in 2023, as the tailwinds of volume growth should support fee-based EBITDA growth and return of capital initiatives.
Among the hedge funds tracked by Insider Monkey, PPL Corporation (NYSE:PPL) was part of 28 public stock portfolios at the end of Q3 2022, and Ken Griffin’s Citadel Investment Group held the largest stake in the company, with 7.18 million shares worth $182 million.
In addition to NextEra Energy, Inc. (NYSE:NEE), Duke Energy Corporation (NYSE:DUK), and Dominion Energy, Inc. (NYSE:D), elite hedge funds are piling into PPL Corporation (NYSE:PPL).
Here is what Miller/Howard Investments has to say about PPL Corporation (NYSE:PPL) in its Q1 2021 investor letter:
“PPL Corp. (PPL) announced the sale of its UK utility business to National Grid (NGG). In a separate transaction, PPL acquired NGG’s Rhode Island utility business. Once the dust settles, we expect PPL to rerate toward US peers.”
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Disclosure. None. 11 High Growth Utility Stocks to Buy is originally published on Insider Monkey.