PNM Resources (PNM) focuses on clean, affordable power sources

PNM Resources PNM’s investments in utility infrastructure and the development of cost-effective power generation units should help ensure reliable and affordable power. The company aims to have a zero-emission generation portfolio by 2040.

However, the Zacks #3 (Hold) ranked company faces risks arising from underutilization of its production capacity.

Tailwinds

PNM Resources plans to invest $6.1 billion from 2024 to 2028 to further strengthen its transmission and distribution infrastructure and improve the reliability of its operations. The capital investment plan is expected to support an average underlying CAGR of 10% during this period.

PNM Resources has joined EPRI’s Climate READi initiative, which should enable it to integrate consistent, evidence-based information into its planning processes and prioritize investments that will best serve the energy grid and customers in the face of growing climate challenges.

The company is focused on phasing out coal-fired power generation by 2024, replacing production with renewable sources. It aims to achieve 80% clean energy by 2040 and achieve 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 60 MW of battery storage, to be owned by a subsidiary. These are expected to be added by summer 2026 and should meet growing demand from PNM’s retail customers.

Contrary winds

The company is investing significantly in replacing its coal-fired power plants as it retires them. Higher spending is putting pressure on rates. Meanwhile, energy-saving initiatives and upgrades are reducing customer energy consumption. These factors are likely to negatively impact the company’s operations and cash flow.

Price increases and other reasons may result in a decrease in energy consumption by customers. This may lead to underutilization of PNM’s production capacities and the capacity of the transmission and distribution networks managed by PNM and TNMP. In such a case, the company’s financial results may be negatively affected.

Price performance

Over the past six months, the company’s shares have lost 8.3%, while the industry has grown 1.3%.

Image Source: Zacks Investment Research

Actions to consider

Some of the better rated stocks in the same industry are Consolidated Edison ED, Portland General Electric POR and Entergy Corp. ETR, each currently has a Zacks Rank of #2 (Buy). You can see The complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Edison’s consolidated long-term (three-to-five years) earnings growth rate is 7.39%. The Zacks Consensus Estimate for ED’s 2024 earnings per share (EPS) is for a growth of 5.1%.

The Zacks Consensus Estimate for POR 2024 and sales is indicating year-over-year improvement of 29.8% and 10.2%, respectively. The current dividend yield is 4.71%, which is 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 earnings per share is pointing to a year-over-year increase of 6.7%.

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