Public Service Enterprise Group, Inc. PEG or PSEG’s focus on renewable generation expansion is likely to bolster its footprint in the clean energy market. To enhance customer reliability, the company makes consistent investments in its infrastructure, strengthening its transmission and distribution system's resilience.

However, this Zacks Rank #3 (Hold) company faces risks like an unfavorable financial position and expenditure to remediate every manufactured gas plant (MGP) site.

Tailwinds Favoring PEG
 

PSEG has a capital investment plan of $18-$21 billion for 2024-2028 to constantly upgrade its infrastructure and energy efficiency initiatives. Its solid capital investment plan is estimated to bring in compounded annual rate base growth of 6-7.5% during the same period.

In the clean energy space, the company is investing significantly in solar initiatives in utility-owned solar photovoltaic (PV) grid-connected systems. As of Dec. 31, 2023, the PSE&G segment owned 158 megawatts of direct current of installed PV solar capacity throughout New Jersey.

PSEG is also expanding its footprint in the wind energy market. It is essential to note that the company has been granted various onshore transmission contracts by the New Jersey Board of Public Utilities to link customers with the offshore wind farms that are currently under development.

Headwinds Faced by PEG
 

PSEG’s segment, PSE&G, has been collaborating with the New Jersey Department of Environmental Protection to assess and remediate environmental conditions at its former MGP sites. As of Sept. 30, 2024, 38 sites require remedial action, and PSE&G estimates costs of $222-$246 million to complete all sites. Such an expenditure might hurt PSEG’s operating results.

As of Sept. 30, 2024, the company owed $18.96 billion in long-term debt. Its cash balance of $0.20 billion at the end of the third quarter fell short of its long-term debt levels and the current debt value of $2.95 billion. This shows that PSEG has a weak solvency position.

PEG Stock Price Movement
 

In the past six months, PEG shares have risen 15.8% compared with the industry’s growth of 7.9%.

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Stocks to Consider
 

Some better-ranked stocks from the same industry are IDACORP, Inc IDA, DTE Energy Company DTE and NiSource Inc. NI, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

IDACORP’s long-term (three to five years) earnings growth rate is 8.3%. The company delivered an average earnings surprise of 4.33% in the last four quarters.

DTE’s long-term earnings growth rate is 8%. The company delivered an average earnings surprise of 8.89% in the last four quarters.

NiSource’s long-term earnings growth rate is 7.5%. The company delivered an average earnings surprise of 22.43% in the last four quarters.

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NiSource, Inc (NI) : Free Stock Analysis Report

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