PNM Resources PNM investment in utility infrastructure and the development of cost-effective power generation units should help facilitate reliable and affordable power supply. The company aims to have an emission-free generation portfolio by 2040.
However, this Zacks Rank #3 (Hold) company has to face risks due to the underutilization of its production capacity.
Tailwinds
In the 2024-2028 period, PNM Resources plans to invest $6.1 billion to further strengthen its transmission and distribution infrastructure and improve the reliability of its operations. The capital investment plan is likely to support an average rate base CAGR of 10% during the period.
PNM Resources has joined the EPRI Climate READi initiative, which should allow it to integrate consistent, science-based information into planning processes and prioritize investments that will best serve the grid and customers in the face of increasing climate challenges.
The company is focused on exiting coal-fired generation by 2024, replacing the production with renewable sources. It aims to achieve 80% clean energy by 2040 and reach net zero emissions by 2045 to add renewable energy sources to its production portfolio.
In May 2024, the company received approval for 100 MW of solar and 310 MW of battery storage, including a 60 MW battery storage facility to be owned by the subsidiary. These are expected to be added by the summer of 2026 and should serve the growing demand from the PNM subsidiary's retail customers.
Headwinds
After retiring coal-fired plants, the company is investing significantly to replace generation capacities. Higher expenditures are exerting pressure on rates. Meanwhile, energy-efficient initiatives and modernization are reducing customer power usage. These factors are likely to negatively impact the company’s operations and cash flows.
Price hikes and other reasons may result in a decrease in customer power usage. This can lead to the underutilization of PNM's production capacity and the transmission and distribution networks' capabilities run by PNM and TNMP. Should this occur, the company's financial performance may be negatively impacted.
Price Performance
In the past six months, shares of the company have lost 8.3% against the industry’s 1.3% growth.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the same industry are Consolidated Edison ED, Portland General Electric POR and Entergy Corp. ETR, 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.
Consolidated Edison’s long-term (three to five year) earnings growth rate is 7.39%. The Zacks Consensus Estimate for ED’s 2024 earnings per share (EPS) indicates an increase of 5.1%.
The Zacks Consensus Estimate for POR’s 2024 EPS and sales implies a year-over-year improvement of 29.8% and 10.2%, respectively. Its current dividend yield is 4.71%, better than the industry’s 3.91%.
Entergy’s long-term earnings growth rate is 7.33%. The Zacks Consensus Estimate for ETR’s 2024 EPS indicates an increase of 6.7% year over year.
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