Utilities benefit from various favorable factors, such as new electric rates, customer additions, cost management and the implementation of energy-efficiency programs. Also, the ongoing investments to improve the resiliency of electric infrastructure against extreme weather conditions and the ongoing transition to cost-effective, renewable energy sources to produce electricity aid the power industry.

Utility service providers generally enjoy consistent revenue growth and profitability. Due to their capacity to create cash flows and manage returns, utilities are able to enhance shareholder value via regular dividend payments.

Due to their capital-intensive nature, utilities need a steady stream of funding for new asset acquisitions and infrastructure improvements. Since September 2024, the Fed has already lowered its fund rate by one percentage point. In 2025, more interest rate reductions are anticipated. Capital-intensive utilities should have improved chances as a result of the rate drop. This is because their margins and profitability will rise as a result of lower capital servicing expenses.

The U.S. electric power sector is focused on cleaner energy sources to produce electricity. Most companies have pledged to deliver 100% clean energy and achieve zero-emission targets in the coming years. The government is also assisting in increasing the use of renewable energy through tax credits. It also helps operators achieve the long-term objective of carbon neutrality by 2050.

Per a U.S. Energy Information Administration (“EIA”) report, the annual share of U.S. electricity generation from renewable energy sources will be 23% in 2024 and 25% in 2025. EIA also expects U.S. sales of 2% more electricity this winter than last year. The increase can be attributed to 3% more sales to residential customers because of colder weather than the previous year.

We have run a comparative analysis on two Zacks Utility — Electric Power companies — NiSource NI and CenterPoint Energy CNP — to decide which one is a better pick for your portfolio.

Both companies carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NiSource has a market capitalization of $16.6 billion, while CenterPoint Energy has $20.24 billion.

NI & CNP’s Growth Projections & Surprise History

The Zacks Consensus Estimate for NiSource’s 2025 earnings is pinned at $1.86 per share on revenues of $6.11 billion. This implies a year-over-year bottom-line increase of 7.3% and a top-line improvement of 8.1%.

The Zacks Consensus Estimate for CenterPoint Energy’s 2025 earnings is pegged at $1.74 per share on revenues of $8.83 billion. This indicates year-over-year bottom and top-line growth of 7.3% and 2.1%, respectively.

NI & CNP Stocks’ Price Performance

In the past six months, NI’s shares have risen 24.2% compared with the industry's growth of 6.5%. Shares of CNP have risen 2.4% in the same time frame.

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NI & CNP’s Debt Position

The debt-to-capital ratio is a vital indicator of the financial position of a company. It shows the amount of debt used to run a business. Currently, NiSource and CenterPoint Energy have a debt-to-capital of 56.86% and 65.36%, respectively, compared with the industry’s 59.8%.

The times interest earned (TIE) ratio for NI is 2.8, and that for CNP is 2.3. Since both companies have a TIE ratio exceeding one, it indicates that they have enough financial flexibility to meet their near-term interest obligations.

NI & CNP’s Dividend Yield

Utility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for NiSource is 2.98%, and the same for CenterPoint Energy is 2.71%. The dividend yields of these companies are better than the Zacks S&P 500 composite’s average of 1.21%.

Final Decision

Both NiSource and CenterPoint Energy stocks are well-positioned and, hence, wise investments for your portfolio. They have the potential to improve further from their current position and serve the demands of their growing customer base. However, our choice at this moment is NI, given its better debt management, TIE ratio, dividend yield and price performance than CNP.

 

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