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3 Companies Building the Next-Generation Energy Grid

By Scott Levine - Mar 13, 2021 at 11:17AM

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These stocks are industry leaders in bringing power to the people.

We've been hearing it for years, but the recent Texas blackouts have made it glaringly apparent: The energy grid needs our urgent attention.

And it's not only the grid in Texas. The American Society of Civil Engineers recently gave the U.S. energy infrastructure a C-minus grade, saying that in the near term, "additional transmission and distribution infrastructure, smart planning, and improved reliability are needed to accommodate the changing energy landscape, as delivery becomes distributed and renewables grow." 

Clearly, updating our energy infrastructure is a pressing need, and many investors are charged up about the companies helping to bring our grid into the 21st century: Companies like Itron (ITRI 1.86%)NV5 Global (NVEE 3.80%), and Quanta Services (PWR 1.92%).

An engineer works in front of a high voltage tower at sunrise.

Image source: Getty Images.

Itron: A global powerhouse

Serving more than 8,000 customers (utilities and cities) in over 100 countries, Itron is playing a crucial role in bringing electric grids -- at home and abroad -- into the 21st century by offering a variety of products and services, including smart meters and analytics software.

The company's grid management helps utilities integrate smart devices and software to achieve greater efficiency and improve resilience. ComEd, the largest electric utility in Illinois, achieved a 46% reduction in the frequency of customer interruptions and a 32% reduction in customers impacted by storms with the help of Itron.

In Maine, electric utility Versant Power recently chose Itron's advanced metering infrastructure, including 160,000 smart meters, to update its grid. Versant President John Flynn said, "With Itron's solution, we will be able to continue to ensure that electricity is more acceptable, available and affordable to more people than before."

During its fourth-quarter 2020 earnings presentation, Itron reported that it achieved a record $973 million in bookings, resulting in a record backlog of $3.3 billion. The insight into the backlog and future potential revenue is valuable for investors, mitigating concern that the company won't be able to achieve growth -- especially in the context of constrained budgets due to the pandemic. 

NV5 Global: A diverse range of services

Engineering consultant NV5 Global provides expertise to a wide range of customers in the public and private sector. On the company's third-quarter 2020 conference call, Alex Hockman, the chief operating officer, talked about NV5's opportunity to update the grid in California, saying, "We have secured several large design and survey contracts in Q3, and wildfires this year in California are expected to continue driving utility efforts to modernize the electrical grid for the years to come."

In January, NV5 announced a contract award from an unnamed national utility "to provide engineering and design services for power distribution, transmission, and substation infrastructure." According to NV5, the three-year contract is expected to contribute over $100 million to its top line. While the deal isn't necessarily transformative for the company's finances, it is noteworthy considering the company reported $660 million in sales for 2020. The deal, furthermore, highlights NV5's ability to provide a diverse range of offerings to utilities, including engineering, surveying and geospatial mapping, project management, construction administration, and testing and inspection services.

Addressing the contribution to the top line of the deal, management hasn't commented on how it will affect profitability; however, investors can infer that the company's grid modernization business plays an important factor in growing the bottom line. Unlike the building, technologies, and sciences segment which saw revenue and gross profit decline from 2019 to 2020, the infrastructure segment (which accounts for grid modernizations services) has recognized both growing revenue and gross profit over the past three years, helping the company overall along both respective metrics.

NVEE Revenue (Annual) Chart

NVEE Revenue (Annual) data by YCharts.

Quanta Services: Keeping current with its capabilities

Like NV5, Quanta Services helps utilities update their electrical grids in a variety of ways. It's an efficient builder of electricity transmission towers to replace old towers with related engineering services like line design and foundation design. Quanta also helps utilities with substation design and construction, distribution engineering, and program management.

Engineering News-Record, a trade publication for the construction industry, rated Quanta No. 1 on three separate top 600 lists: specialty contractors, electrical contractors, and utility contractors. And Fortune recently ranked the company No. 3 in the engineering and construction category of its listing of the world's most admired companies.

Like Itron, which has seen an increase in its backlog, Quanta also has seen growing demand, ending 2020 with a record $15.1 billion in backlog.

And last summer, Quanta entered into a joint venture, LUMA Energy, that represents a 15-year operations and maintenance agreement with the Puerto Rico Electric Power Authority to help modernize the island's energy grid. Quanta management noted on the fourth-quarter 2020 conference call that LUMA's contribution over the 15-year agreement would imply a backlog equivalent of more than $6 billion for the company.

The power-packed recap

Itron, NV5, and Quanta are all viable investments.  Of the three though, NV5 may be better suited to investors in search of a significant growth stock.

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Stocks Mentioned

NV5 Global Stock Quote
NV5 Global
$120.62 (3.80%) $4.42
Quanta Services, Inc. Stock Quote
Quanta Services, Inc.
$120.63 (1.92%) $2.27
Itron, Inc. Stock Quote
Itron, Inc.
$51.04 (1.86%) $0.93

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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