We recently compiled a list of the 10 Worst Performing Utility Stocks in 2024.In this article, we are going to take a look at where Centrais Eletricas Brasileiras (NYSE:EBR) stands against the other utility stocks.
Man of the hour, CEO Jensen Huang at the Bipartisan Policy Center on September 27, emphasized the crucial role of artificial intelligence (AI) in transforming the energy and utilities sector. According to Huang, AI has the potential to revolutionize the way energy is produced, distributed, and consumed, leading to significant economic and environmental benefits.
Huang highlighted the importance of accelerating the development and deployment of AI in the energy sector, citing examples such as smart grids, energy storage, and renewable energy integration. He noted that AI can help optimize energy distribution, predict energy demand, and identify areas of inefficiency in the grid. For instance, a study by the National Renewable Energy Laboratory (NREL) found that AI can help reduce energy waste by up to 15% by optimizing energy consumption in buildings and homes.
Huang also emphasized the need for a more efficient and resilient energy system, citing the growing demand for electricity and the increasing complexity of the grid. He argued that AI can help address these challenges by providing real-time monitoring and control, predictive maintenance, and advanced analytics. For example, a study by the Electric Power Research Institute (EPRI) found that AI can help reduce the frequency and duration of power outages by up to 50%.
Huang also highlighted the potential for AI to enable new business models and revenue streams in the energy sector, such as peer-to-peer energy trading and community-based energy sharing. For example, a study by the University of California, Berkeley found that peer-to-peer energy trading can help reduce energy costs by up to 20% and increase the adoption of renewable energy by up to 30%.
In terms of energy consumption, Huang noted that AI can help optimize energy usage in buildings, homes, and industries, leading to significant reductions in energy waste and greenhouse gas emissions. According to the U.S. Energy Information Administration (EIA), buildings account for approximately 40% of energy consumption in the United States, and industries account for approximately 30%. AI can help optimize energy consumption in these sectors by identifying areas of inefficiency and providing real-time feedback on energy usage.
In terms of policy, Huang argued that regulatory frameworks should support the development and deployment of AI in the energy sector. He called for increased investment in research and development, as well as workforce training and education programs to ensure that the energy sector has the necessary skills to adopt and deploy AI technologies.
Additionally, Huang emphasized the need for open standards and interoperability protocols to facilitate the integration of AI technologies in the energy sector. He noted that the development of open standards and interoperability protocols can help ensure that AI technologies are compatible with existing energy infrastructure, and can help facilitate the sharing of data and best practices across the industry.
AI has significant potential to transform the energy and utilities sector, leading to increased efficiency, reduced waste, and a more sustainable future. As the energy sector continues to evolve and grow, it is clear that AI will play a critical role in shaping its future, with that in context, let’s take a look at the 10 worst performing utility stocks in 2024.
Our Methodology
To compile our list of the 10 worst performing utility stocks in 2024, we used the Finviz and Yahoo stock screeners to find stocks that have experienced the most significant decline on a year-to-date basis and have a market cap of more than $500 million as of October 15. We then narrowed our choices to 10 stocks with the worst year-to-date performance. We also included their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in descending order of their year-to-date performance as of October 15.
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 smallcap and largecap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A sprawling hydroelectric power plant nestled high in the mountains.
Centrais Eletricas Brasileiras (NYSE:EBR), commonly known as Eletrobras, is the largest power utility company in Latin America, with operations in electricity generation, transmission, and distribution across Brazil. The company operates a significant portfolio of hydroelectric plants and plays a crucial role in Brazil’s electricity market.
In Q2, Centrais Eletricas Brasileiras (NYSE:EBR) reported a net income of $110 million, despite a 25.8% annual reduction due to higher operating costs and financial expenses. However, the company's adjusted EBITDA margin of 50.1% and net debt of $8 billion with a leverage ratio of 1.95x, demonstrate its solid financial health.
In Q2, Centrais Eletricas Brasileiras (NYSE:EBR) performance was marked by a 9.1% annual increase in regulatory net operating revenue and a 10% increase in energy volume. However, total operating costs increased by 32.7% year over year, mainly due to charges for using the electricity grid and higher costs for purchased energy. Despite these challenges, Centrais Eletricas Brasileiras (NYSE:EBR) continues to invest in its transmission segment, with $357 million in Q2.
Centrais Eletricas Brasileiras (NYSE:EBR) is a compelling investment opportunity for value investors seeking a high-quality company with a strong track record of profitability and a solid financial profile. Despite a mixed Q2 performance, the company continues to show excellent signs of improvement, including a reduction in operating expenses, strategic divestment of non-core assets, and a strengthened capital structure. The company is expected to achieve 32.25% earnings growth in this year. With a consensus Buy rating from industry analysts, the stock has a target price of $10.40, which represents a 41.71% upside potential from its current level.
Overall EBR ranks 8th on our list of the worst performing utility stocks in 2024. While we acknowledge the potential of EBR as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than EBR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
