Last week, Kapitall spoke with Richard and Kyle Rudden of Target Rock Advisors, which specializes in creating indexes of profitable and sustainable utility companies.
Although utilities are rarely considered "sustainable investments," and "sustainability" is loosely defined to begin with, Target Rock aims to make sense of this otherwise unclear market sector.
Interestingly, the utilities that make their lists of financially sound, environmentally sustainable, and socially sustainable stocks have outperformed the wider utility industry. By and large, the names also have forward earnings growth of around 6%, a big number for an industry that tends to grow at a glacier pace.
Natural gas outlook
The Ruddens know the ins and outs of utility trends, so it bodes well that their outlook on natural gas utilities jives with other bullish industry analysts: "There's a tremendous amount of gas supplies and we've perfected the technology to access it, but the big question is if production costs can be supported by present and future prices. ... At present it's not sustainable." That being said, there may soon be a turnaround.
"Wells are shutting down because there's no economic sense to keep producing. But for the natural gas being produced, there are more proposals to liquefy it and ship overseas. It causes prices to start coming back up -- they will get to a good equilibrium level."
Business section: Investing ideas
The utilities on Target Rock Advisor's come in various forms, including electricity generation, distribution systems, coal, oil, and natural gas. They point out that no names on their list are pure natural gas stocks.
However, there are 19 names with exposure to natural gas that made it on the sustainable indexes. We list them below, along with their ranking and scores (out of 100) on Target Rock's five indexes:
- Overall sustainability
- Economic
- Environmental
- Social
- ESG (Environmental, social, and governance)
List sorted by rank on Overall Sustainability index. (Click here to access free, interactive tools to analyze these ideas.)
1. Edison International (NYSE: EIX): Engages in the supply of electric energy in central, coastal, and southern California. The company has a market cap of $14.26 billion, most recent closing price at $43.72. Overall Sustainability rank: 4 score: 79.1. Economic rank: 13. Score: 75.4. Social rank: 7. Score: 79.7. Environmental, Social, and Governance rank: 4. Score: 81. Environmental rank: 7. Score: 82.2.
2. Avista: Engages in the generation, transmission, and distribution of energy and other energy-related businesses in the United States and Canada. The company has a market cap of $1.5 billion, most recent closing price at $25.42. Overall Sustainability rank: 5. Score: 78.9. Economic rank: 21. Score: 73.3. Social rank: 11. Score: 77.4. Environmental, Social, and Governance rank: 3. Score: 81.6. Environmental rank: 3. Score: 85.9.
3. American Electric Power (NYSE: AEP): Engages in the generation, transmission, and distribution of electric power to retail customers. The company has a market cap of $18.69 billion, most recent closing price at $38.54. Overall Sustainability rank: 8. Score: 77.2. Economic rank: 14. Score: 75.3. Social rank: 4. Score: 82.7. Environmental, Social, and Governance rank: 8. Score: 78.1. Environmental rank: 24. Score: 73.6.
4. Entergy: Operates as an integrated energy company in the United States. The company has a market cap of $11.54 billion, most recent closing price at $64.86. Overall Sustainability rank: 9. Score: 77. Economic rank: 1. Score: 82.1. Social rank: 5. Score: 82.4. Environmental, Social, and Governance rank: 19. Score: 74.4. Environmental rank: 36. Score: 66.4.
5. Duke Energy Corporation (NYSE: DUK): Operates as an energy company in the Americas. The company has a market cap of $28.85 billion, most recent closing price at $21.44. Overall Sustainability rank: 10. Score: 76.9. Economic rank: 8. Score: 76.7. Social rank: 12. Score: 77.4. Environmental, Social, and Governance rank: 11. Score: 77. Environmental rank: 14. Score: 76.5.
6. IdaCorp: Engages in the generation, transmission, distribution, sale, and purchase of electric energy in the United States. The company has a market cap of $1.94 billion, most recent closing price at $38.55. Overall Sustainability rank: 13. Score: 75. Economic rank: 20. Score: 73.7. Social rank: 37. Score: 65.7. Environmental, Social, and Governance rank: 13. Score: 75.6. Environmental rank: 4. Score: 85.5.
7. Exelon (NYSE: EXC): Operates as a utility services holding company in the United States. The company has a market cap of $25.48 billion, most recent closing price at $38.12. Overall Sustainability rank: 18. Score: 73.9. Economic rank: 12. Score: 75.8. Social rank: 28. Score: 71.6. Environmental, Social, and Governance rank: 24. Score: 73. Environmental rank: 21. Score: 74.3.
8. ALLETE: Engages in the generation, transmission, and distribution of electric power in the United States. The company has a market cap of $1.52 billion, most recent closing price at $39.98. Overall Sustainability rank: 19. Score: 73.8. Economic rank: 31. Score: 70.4. Social rank: 24. Score: 72.6. Environmental, Social, and Governance rank: 14. Score: 75.5. Environmental rank: 11. Score: 78.5.
9. Dominion Resources: Engages in producing and transporting energy in the United States. The company has a market cap of $29.71 billion, most recent closing price at $51.79. Overall Sustainability rank: 21. Score: 73.3. Economic rank: 15. Score: 74.8. Social rank: 14. Score: 76.9. Environmental, Social, and Governance rank: 26. Score: 72.5. Environmental rank: 33. Score: 68.1.
10. Consolidated Edison: Provides electric, gas, and steam utility services in the United States. The company has a market cap of $17.39 billion, most recent closing price at $59.04. Overall Sustainability rank: 22. Score: 73. Economic rank: 22. Score: 73.1. Social rank: 23. Score: 74.3. Environmental, Social, and Governance rank: 25. Score: 73. Environmental rank: 26. Score: 71.6.
11. El Paso Electric: Engages in the generation, transmission, and distribution of electricity primarily in west Texas and southern New Mexico. The company has a market cap of $1.19 billion, most recent closing price at $29.82. Overall Sustainability rank: 26. Score: 72.6. Economic rank: 6. Score: 77.1. Social rank: 36. Score: 66.7. Environmental, Social, and Governance rank: 29. Score: 70.3. Environmental rank: 22. Score: 74.
12. Great Plains Energy: Engages in the generation, transmission, distribution, and sale of electricity in the United States. The company has a market cap of $2.71 billion, most recent closing price at $19.69. Overall Sustainability rank: 28. Score: 70.9. Economic rank: 29. Score: 70.6. Social rank: 16. Score: 76.2. Environmental, Social, and Governance rank: 27. Score: 71.1. Environmental rank: 37. Score: 65.9.
13. Empire District Electric (NYSE: EDE): Together with its subsidiaries, primarily engages in the generation, purchase, transmission, distribution, and sale of electricity in Missouri, Kansas, Oklahoma, and Arkansas. The company has a market cap of $837.36 million, most recent closing price at $19.94. Overall Sustainability rank: 32. Score: 68.6. Economic rank: 27. Score: 70.9. Social rank: 34. Score: 67.1. Environmental, Social, and Governance rank: 36. Score: 67.5. Environmental rank: 34. Score: 67.9.
14. Ameren: Operates as a public utility company in Missouri and Illinois, the United States. The company has a market cap of $7.85 billion, most recent closing price at $31.92. Overall Sustainability rank: 34. Score: 68.1. Economic rank: 40. Score: 67.4. Social rank: 25. Score: 72.6. Environmental, Social, and Governance rank: 35. Score: 68.5. Environmental rank: 40. Score: 64.5.
15. Cleco: Engages in the generation, transmission, distribution, and sale of electricity in Louisiana. The company has a market cap of $2.44 billion, most recent closing price at $39.71. Overall Sustainability rank: 40. Score: 66.7. Economic rank: 36. Score: 69. Social rank: 15. Score: 76.4. Environmental, Social, and Governance rank: 41. Score: 65.6. Environmental rank: 47. Score: 54.8.
16. CH Energy Group: Through its subsidiaries, Central Hudson Gas & Electric Corporation and Central Hudson Enterprises Corporation, it engages in the electric utility, natural gas utility, and fuel distribution business. The company has a market cap of $975.41 million, most recent closing price at $65.49. Overall Sustainability rank: 43. Score: 65.1. Economic rank: 46. Score: 62. Social rank: 38. Score: 64. Environmental, Social, and Governance rank: 38. Score: 66.7. Environmental rank: 31. Score: 69.4.
17. DTE Energy: Operates as an electric and natural gas utility company in Michigan. The company has a market cap of $9.49 billion, most recent closing price at $55.57. Overall Sustainability rank: 44. Score: 64.7. Economic rank: 35. Score: 69.1. Social rank: 31. Score: 68.8. Environmental, Social, and Governance rank: 44. Score: 62.5. Environmental rank: 46. Score: 56.1.
18. Black Hills: Operates as a diversified energy company primarily in the United States. The company has a market cap of $1.42 billion, most recent closing price at $31.82. Overall Sustainability rank: 47. Score: 63.9. Economic rank: 34. Score: 69.3. Social rank: 44. Score: 61.9. Environmental, Social, and Governance rank: 45. Score: 61.1. Environmental rank: 43. Score: 60.4.
19. CMS Energy: Operates as an energy company primarily in Michigan. The company has a market cap of $5.88 billion, most recent closing price at $22.43. Overall Sustainability rank: 48. Score: 61.3. Economic rank: 45. Score: 63.1. Social rank: 40. Score: 63.7. Environmental, Social, and Governance rank: 47. Score: 60.4. Environmental rank: 44. Score: 57.1.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
