We retain our Neutral recommendation on Xcel Energy Inc. (XEL). The Western and Midwestern utility service provider currently carries a Zacks Rank #3 (Hold).
Why the Reiteration?
Xcel Energy posted favorable earnings and revenue numbers in the first quarter 2013 compared with the year-ago quarter. Both revenues and earnings moved up 8% and 26.8% year over year, respectively from prior-year levels.
Going forward, its request for proposals for expansion of green generation in the states of Texas, Colorado, New Mexico and Upper Midwest territories will allow Xcel to offer affordable clean energy services to its customers. Xcel Energy’s renewable initiatives are also a step ahead with the company achieving a generating capacity of 1 billion kilowatt-hours of wind energy in Colorado.
On the flip side, the soft economic fundamentals in the U.S. are still weighing on the company’s profitability. The possibility of turbulent weather conditions owing to the prediction of strong hurricanes in the period June to Nov 2013, as per the National Oceanic Atmospheric Administration (NOAA), could also pose difficulties.
Xcel Energy’s several transmission projects under the CapX2020 program are advancing well, which will act as key growth drivers in the future.
Nevertheless, stringent regulatory laws will continue to present cost challenges for Xcel Energy.
Other Stocks to Consider
Considering the pros and cons, we retain a cautious stance on Xcel Energy. However, other utilities presently looking good are Zacks Ranked #2 (Buy) ALLETE Inc. (ALE), DTE Energy Company (DTE) and Dynegy Inc. (DYN).
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