Xcel Energy XEL is poised to benefit from its solid capital investment plan for infrastructure strengthening and clean power generation. The company is also gaining from an expanding customer base and rising demand.
However, this Zacks Rank #3 (Hold) company faces risks related to commodity price fluctuations and the failure of transmission and distribution lines.
Factors Acting in Favor of XEL
Xcel Energy continues to invest substantially in its utility assets to provide reliable services to its customers and effectively meet rising electricity demand. The company expects to spend $45 billion during the 2025-2029 period. These investments are aimed at strengthening and expanding its transmission, distribution, electric generation and renewable projects. Courtesy of its strategic investments in the regulated asset, Xcel Energy expects long-term earnings per share (EPS) growth in the range of 6-8%.
High-quality and reliable services provided by the company attract new customers and allow Xcel Energy to serve an expanding electric and natural gas customer base. In the second quarter of 2025, the electric customer base increased 1% year over year, and the natural gas customer base improved 0.9% from the year-ago period.
XEL is focused on increasing situational awareness, enhancing powerline safety settings and providing real-time data resiliency rebates, which should further boost customers' reliability. The company is also set to gain from competitive advantages and a robust pipeline to capture data center demand. Xcel Energy expects a total customer request for data centers of nearly 8.9 gigawatt by 2029.
Challenges Faced by XEL
Xcel Energy’s operations are subject to commodity price fluctuations and other risks associated with energy markets and energy production. Despite the existing fuel recovery mechanisms in most of its service territories, higher fuel costs could significantly impact the results of operations if expenses are not recovered.
Xcel Energy’s natural gas and electric transmission and distribution operations are exposed to several risks, including explosions, leaks and mechanical setbacks. These incidents can affect the company’s operations, thereby impacting its financial performance.
XEL Stock's Price Performance
In the past three months, shares of the company have risen 5.6% against the industry’s 0.6% decline.
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Stocks to Consider
Some better-ranked stocks from the same industry are TransAlta TAC, sporting a Zacks Rank #1 (Strong Buy), and NiSource NI and Fortis FTS, both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TAC’s 2025 EPS is pinned at 8 cents, indicating a year-over-year decline of 81.4%. The Zacks Consensus Estimate for 2025 sales is pinned at $2 billion, indicating a year-over-year decline of 4%.
NiSource’s long-term (three to five years) earnings growth rate is 7.88%. The Zacks Consensus Estimate for NI’s 2025 EPS implies an improvement of 7.4% from that recorded in 2024.
FTS’ long-term earnings growth rate is 5.13%. The company delivered an average earnings surprise of 4.5% in the last four quarters.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
