Introduction#
Jefferies, a well-known investment firm, has pinpointed several utility stocks that are set to gain from the expansion of data centers, particularly those operated by major technology companies like Amazon, Meta, and Google. These utilities have secured advantageous agreements that not only promise strong earnings growth but also protect residential customers from rising infrastructure costs.
NiSource: A Leading Choice#
NiSource has been identified as Jefferies' top pick among utility stocks. The company has implemented an unregulated structure in Indiana, known as "GenCo," which is increasingly recognized as a benchmark in the industry for managing large energy demands. This arrangement, which is awaiting regulatory approval, is expected to yield significant returns for NiSource while providing benefits to current users, such as a monthly savings of about $7. The company anticipates more agreements with large tech firms, which could enhance its earnings per share growth, currently projected at over 10%.
Entergy: Strong Growth Potential#
Entergy is also highlighted for its impressive earnings growth, estimated at over 11%. This growth is fueled by major infrastructure projects for data centers in states like Louisiana, Arkansas, and Mississippi, driven by tech giants. Entergy's favorable regulatory environment has allowed it to attract these large operations, setting it apart from other states facing pushback against data centers. In its recent earnings report, Entergy posted earnings per share of $0.51 and revenue of $2.92 billion, both falling short of analyst expectations.
Xcel Energy: Diversified and Cost-Effective#
Xcel Energy stands out for its low-cost and diverse operations in the Midwest, which align well with the decarbonization goals of hyperscalers. The company is recognized for its strong growth in earnings per share and rate base, even while trading at a lower valuation compared to its peers. Recent developments include an analyst upgrade from Argus, which raised its price target and maintained a Buy rating on the stock. Additionally, Xcel Energy has appointed Rob Cain as its new senior vice president, signaling ongoing leadership changes within the company.