Despite the selling, and the Federal Reserve members saying that interest rate increases, while being slow and very measured, are on the way, the UBS team sees three stocks that they believe are ready to outperform. They also think the three are benefiting from strong stories that should help insulate them from a Federal Reserve storm.
Edison International
This company regularly raises its dividend and is a strong growth story. Edison International (NYSE: EIX) generates electricity through hydroelectric, diesel, natural gas, gas-fueled, combustion turbine, nuclear and photovoltaic sources. It supplies electricity primarily to residential, commercial, industrial, agricultural and other customers, as well as public authorities through transmission and distribution networks.
Analysts agree that the company has a very strong portfolio of regulated utility assets and well-managed merchant energy operations. Edison International presents investors a lower risk profile compared to many of the utility-only peers. The company also has a very solid financial position backed by outstanding strong cash generation capacity.
Edison investors are paid a 2.85% dividend. The UBS price target for the stock is $69, and the Thomson/First Call consensus price target is $69.88. The stock closed Thursday at $58.86 per share.
NextEra Energy
This stock may have been hit for a perceived lack of a renewables pipeline expansion. NextEra Energy Inc. (NYSE: NEE) is a leading clean energy company with consolidated revenues of approximately $17.0 billion and approximately 44,900 megawatts of generating capacity, which includes megawatts associated with noncontrolling interests related to NextEra Energy Partners.
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The company recently completed a merger with Hawaiian Electric that has put Hawaii on the leading edge of clean energy nationally, successfully integrating rooftop solar with 12% of its residential customers and helping meet 21% of customer electricity needs from renewable energy resources. The company supplies power to approximately 450,000 customers, or 95% of Hawaii’s population, through its electric utilities, Hawaiian Electric Company, Hawaii Electric Light Company and Maui Electric Company, and it provides a wide array of banking and other financial services to consumers and businesses through American Savings Bank, one of Hawaii’s largest financial institutions.
NextEra shareholders are paid a very solid 3% dividend. The UBS price target is posted at $115, and the consensus target is $117.33. Shares closed Thursday at $102.26.
TECO Energy
This company posted solid first-quarter numbers and beat revenue estimates. TECO Energy Inc. (NYSE: TE) is an energy-related holding company with regulated electric and gas utilities in Florida and New Mexico. Tampa Electric serves more than 700,000 customers in West Central Florida. Peoples Gas System serves more than 350,000 customers across Florida, and New Mexico Gas serves more than 510,000 customers across New Mexico. Other TECO Energy subsidiaries include TECO Coal, which owns and operates coal-production facilities in Kentucky, Tennessee and Virginia.
The company recently announced a buyer for all of its interest in TECO Coal. Under the sales agreement with Cambrian Coal, the total sales price was pegged at $140 million. The price also includes a future contingent consideration of $60 million, if certain coal benchmark prices reach specific levels over the next five years.
The UBS team thinks that TECO could be a solid takeover target, and the company could add immediate value to a larger entity.
TECO investors are paid an outstanding 4.92% dividend. The UBS price target is $22, while the consensus target is $19.54 and the stock closed on Thursday at $18.27 per share.
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The UBS stocks make sense for people looking to carve out an allocation of utility stocks in a well-rounded growth portfolio. The all have been nicked and could provide and growth and value for investors.
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