We recently published a list of the 12 Best Electrical Infrastructure Stocks to Buy According to Analysts. In this article, we are going to take a look at where Duke Energy Corporation (NYSE:DUK) stands against the other best electrical infrastructure stocks to buy according to analysts.
The United States is witnessing a notable surge in electricity demand, driven by unprecedented electrification, the rapid expansion of AI-driven data centers, and a resurgence in industrial reshoring and manufacturing. As of September 2024, electricity demand rebounded with a 1.8% increase, reversing a 1.7% decline during the same period in 2023, aided by favorable weather conditions. This uptick signals a sustained period of growth, marking a departure from two decades of stagnant demand and potentially reshaping the electricity landscape in profound ways.
According to Deloitte, this demand has spurred a corresponding increase in power generation. By September 2024, utility-scale power generation reached approximately 3,287 billion kWh, reflecting a 3% year-over-year growth. Renewable energy, particularly solar, led the charge, with a 30% increase compared to 13% during the same period in 2023. In that same vein, solar energy is expected to be the fastest-growing energy source by year-end, potentially achieving a 34% growth rate. Moreover, the rapid adoption of digitalization and AI has significantly heightened the demand for data centers across the United States. To keep pace with this adoption, McKinsey projects that data center power requirements might triple by 2030, increasing from 3–4% of the nation’s total electricity demand to approximately 11–12%. This will necessitate a substantial rise in electricity production, signaling a dramatic shift in a country where power demand has remained relatively flat since 2007. By 2030, data centers could account for 30–40% of all net new electricity demand, alongside rising needs from domestic manufacturing, electric vehicles, and electrolyzers.
Furthermore, in response to escalating climate-driven disasters and an electricity grid increasingly reliant on intermittent renewable energy, the U.S. is rapidly deploying large-scale battery systems to help prevent power outages. From minimal installations just a few years ago, the country has now added over 20 gigawatts of battery capacity to its electric grid, with 5 GW installed in the first seven months of this year alone, according to the EIA. This rapid expansion is equivalent to adding the output capacity of 20 nuclear reactors to the grid in just four years. The EIA forecasts that this capacity could double to 40 GW by 2025 if planned expansions proceed as expected.
On the other hand, transformations in policy, market dynamics, and technological advancements are also driving significant shifts in electricity generation, presenting new challenges for the US electric grid. Much of the country’s high-voltage transmission infrastructure dates back to the 1960s and 1970s, leaving it ill-equipped to handle current and future grid demands. Policy changes could further shape the landscape. For instance, Bernstein analysts have highlighted potential risks to electrical infrastructure stocks if the incoming Trump administration repeals the $7,500 electric vehicle tax credit. Such a move, reportedly under consideration as part of broader tax reform, would eliminate a key driver of electrical distribution infrastructure investment. EV charging typically occurs at home, and a growing EV installed base has been a significant catalyst for grid investments. Bernstein estimates that repealing the tax credit would lower electricity demand growth from EVs, reducing the compound annual growth rate from 0.6% to 0.4% over the next five years. To illustrate the potential impact, they pointed to Germany’s rollback of EV subsidies in 2023, which led to a 30% drop in EV-related demand year-to-date in 2024.
All things considered, leading electrical infrastructure stocks are poised for substantial gains, supported by the approval of over 46,000 infrastructure projects spanning a wide range of industries, and a monumental $1.2 trillion investment allocated by the U.S. administration.
Aerial view of a power plant near a lake lit up at night, showing off the company’s expansive electricity generation capabilities.
Our Methodology
To compile our list of the best electrical infrastructure stocks to buy according to analysts, we analyzed various stock screeners and ETFs, selecting stocks based on their upside potential as of December 16. The stocks are ranked by their average upside potential, from lowest to highest, based on price targets. Additionally, we included the number of hedge funds holding stakes in these stocks, using Insider Monkey’s Q3 hedge fund data.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Duke Energy Corporation (NYSE:DUK)
Average Analyst Upside: 13.18%
Number of Hedge Fund Holders: 46
Duke Energy Corporation (NYSE:DUK), a leading U.S.-based energy company, operates through two primary segments: Electric Utilities and Infrastructure (EU&I) and Gas Utilities and Infrastructure (GU&I). The company is actively advancing its clean energy transition plan, aiming to achieve net-zero methane emissions from natural gas services and a 50% reduction in carbon emissions from electric generation by 2030.
BMO Capital recently revised its price target for Duke Energy Corporation (NYSE:DUK) to $124 from $128, while maintaining an Outperform rating. This adjustment followed Duke Energy’s Q3 earnings report, which revealed an EPS of $1.62—below BMO’s estimate of $1.68 and the consensus estimate of $1.69. While the company reaffirmed its 2024 full-year earnings guidance of $5.85 to $6.10, management anticipates results to land in the lower half of this range, citing financial impacts from recent storms, including restoration costs and revenue losses caused by widespread outages.
Despite short-term headwinds, Duke Energy’s management remains confident in its long-term EPS growth outlook of 5% to 7%, starting from the 2024 midpoint. The company plans to present a detailed update on its capital strategy, financing plans, and load growth by Q4.
Duke Energy Corporation (NYSE:DUK) has a strong track record of rewarding shareholders, with 97 consecutive years of dividend payments and 12 consecutive years of dividend increases. On November 15, the company declared a quarterly dividend of $1.045 per share, consistent with the previous payout, which was scheduled for December 16.
Investor sentiment showed some strengthening in Q3, with 46 hedge funds holding stakes in Duke Energy Corporation (NYSE:DUK), up from 37 funds in the prior quarter, according to Insider Monkey’s database.
Overall, DUK ranks 7th on our list of best electrical infrastructure stocks to buy according to analysts. While we acknowledge the potential of DUK, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DUK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
