Which utility stocks could shine brightest in 2025? News ad

Meeting the insatiable demand for energy is exacerbated by the rapid growth of data centers powered by artificial intelligence. It is estimated that by 2030 they will consume 9% of all electricity generated domestically. This is forcing many electric power companies to turn to nuclear reactors and various types of renewable and clean energy sources. The two main players in the utilities sector are Duke Energy Co. New York Stock Exchange: DUK And NRG Inc. New York Stock Exchange: NRG. The two electric companies serve more than 15 million customers and are located in more than 20 states. The most obvious difference between the two is that Duke Energy is a regulated utility, while NRG participates in competitive, deregulated energy markets. For investors, the question is which stocks are likely to deliver big returns in 2025? Here’s a breakdown of both companies to help you make your decision.

Duke Energy: Classic Utility Business Model

Duke Energy today

$110.73 +1.47 (+1.35%)

As of 3:59 pm ET

This is fair market value as provided by Polygon.io. Find out more.

52 week range

$90.09

▼

$121.25

Dividend yield

3.77%

P/E ratio

20.35

Target price

$122.23

When you think of a classic utility company, Duke Energy should come to mind. Its primary activities are regulated electricity and natural gas generation businesses. Duke owns and operates power plants, transmission lines and distribution networks that deliver electricity and natural gas to its 8.2 million customers, primarily in the South. Duke is targeting net-zero methane emissions from its gas business by 2030 and net-zero carbon emissions from its electricity generation by 2050. The company has relatively low risk, with the exception of exposure to the Florida hurricane season. In fact, Duke expects hurricane recovery costs to be up to $2.9 billion for the 2024 hurricane season, which devastated Milton, Debbie and Helen. The company had to restore 5.5 million power outages during the historic hurricane season.

The stock is a Dividend Aristocrat and currently pays an annual dividend yield of 3.82%. At the current PE of 20.10, the stock is trading at a discount to its 2023 and 2024 PE of around 31.

Q3 2024 results unchanged and guidance confirmed

Utility stocks tend to be boring stocks that produce predictable, stable, and sustainable returns. Duke Energy didn’t disappoint, breaking the mold in the third quarter of 2024. The company reported earnings per share of $1.62, beating analysts’ consensus estimates by 7 cents. Revenue rose 2.1% year over year to $8.16 billion, beating the consensus estimate of $8.06 billion.

Management reiterated its full-year 2024 guidance of earnings per share of $5.85 to $6.10 versus consensus estimates of $5.98. They also reaffirmed their long-term adjusted earnings per share growth rate of 5% to 7% through 2028 and a 2024 midpoint of $5.98.

Duke Energy CEO Lynn Good commented, “As we look ahead to 2025 and beyond, we have strong momentum driven by our track record of constructive regulatory outcomes, including our recent IRP approvals in the Carolinas, as well as our strong growth in our attractive jurisdictions. . These tailwinds give us confidence in our long-term prospects, and we are affirming EPS growth rates of 5% to 7% through 2028, above the midpoint of our 2024 range.” Duke Energy shares are up 12.84% over the past 12 months.

NRG Energy: Surfing Deregulated Markets

NRG Energy today

$111.57 +7.06 (+6.75%)

As of 3:59 pm ET

This is fair market value as provided by Polygon.io. Find out more.

52 week range

$51.26

▼

$112.79

Dividend yield

1.46%

P/E ratio

28.03

Target price

$111.43

NRG operates primarily in deregulated electricity markets where there is competition between energy suppliers. Regulated markets typically have one large utility company that controls the generation, transmission and distribution of electricity, such as Duke Energy. In deregulated markets, market prices are determined by supply and demand because energy suppliers can access existing transmission and distribution infrastructure owned by the utility company.

While consumers can often enjoy lower prices in these markets, anomalies can occur during extreme weather events, causing prices to reach sky-high levels. That was the case during the 2021 snowstorm in Texas, when customers who signed up for variable-rate wholesale plans saw their electric bills rise by up to $5,000 during the weeklong storm.

Volatility is the norm: raising benchmarks

NRG Energy reported third-quarter 2024 earnings per share of $1.90, missing analysts’ consensus estimates by 10 cents. Revenue fell 9.1% YoY to $7.22 billion versus one analyst’s estimate of $9.38 billion.

The company announced a capital commitment of $1.36 billion, increasing its share repurchase program by $1 billion to $3.7 billion through 2025.

NRG also raised its full-year 2024 EPS guidance to $5.95 to $6.75, up from its previous forecast of $5.00 to $6.30, versus analyst consensus estimates of $6.36. NRG shares are up 104% over the past 12 months.

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