Yahoo Finance 4 Utility Stocks to Buy as Consumer Sentiment Hits 7-Month Low
The Federal Reserve has struggled to curb inflation despite adopting a strict monetary tightening campaign. This has reignited fears among Americans that the economy could slip into a recession.
The University of Michigan’s preliminary reading on the overall index of consumer sentiment came in at 65.6 in June after falling to 69.1 in May, the lowest in seven months. This was also sharply lower than the consensus estimate of a preliminary reading of 72.
The survey’s one-year outlook for inflation remained unchanged at 3.3% in June, which was also sharply above the 2.3-3% range seen in the two years prior to the pandemic.
Also, the survey’s five-year outlook for inflation jumped to 3.1% in June from 3% the month earlier.
Inflation declined sharply in 2023 before resuming its climb in the first quarter. However, it showed signs of cooling in April and maintained the same pace in May. The consumer price index (CPI) remained unchanged in May on a month-over-month basis after rising 0.3% in April.
Year over year, CPI increased 3.3% in May, which was slightly below the consensus estimate of a rise of 3.4%.
Core CPI, which excludes the volatile food and energy prices, jumped 0.2% month over month and 3.4% from year-ago levels, both of which came in below the consensus estimate of a rise of 0.3% and 3.5%, respectively.
Also, U.S. GDP grew at a modest pace of 1.3% in the first quarter, after increasing 3.4% in the fourth quarter of 2023.
The Federal Reserve kept interest rates unchanged in its June Federal Open Market Committee (FOMC) meeting in its current range of 5.25-5.5%. However, it also said that inflation hasn’t been declining at its desired pace and remains above the central bank’s 2% target.
The Federal Reserve also said that it now sees only one rate cut this year, significantly lower than the three expected earlier. Higher interest rates for a longer period could keep markets volatile.
Our Choices
Given this situation, it would be wise to invest in defensive stocks. We have chosen four utilities, with a low beta (beta greater than 0 but less than 1), a high dividend yield and a favorable Zacks Rank. These are Pinnacle West Capital Corporation PNW, Atmos Energy Corporation ATO, California Water Service Group CWT and MDU Resources Group, Inc. MDU. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Pinnacle West Capital Corporation provides electricity services (wholesale or retail) in the state of Arizona through its subsidiaries. PNW is involved in the generation, transmission and distribution of electricity from coal, nuclear, gas, oil and solar.
Pinnacle West Capital Corporation has an expected earnings growth rate of 8.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 60 days. PNW currently carries a Zacks Rank #2. Pinnacle West Capital Corporation has a beta of 0.50 and a current dividend yield of 4.60%.
Atmos Energy Corporation, along with its subsidiaries, is engaged in the regulated natural gas distribution and storage business. ATO serves nearly 3.4 million customers in more than 1,400 communities in eight states, from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energyoperates more than 72,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines.
Atmos Energy has an expected earnings growth rate of 10.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.8% over the last 60 days. ATO presently has a Zacks Rank #2. Atmos Energy has a beta of 0.67 and a current dividend yield of 2.77%.
California Water Service Group is one of the largest investor-owned water utilities in the United States. CWT has six subsidiaries — California Water Service, Washington Water Service Company, New Mexico Water Service Company, Hawaii Water Service Company, CWS Utility Services and HWS Utility Services.
California Water Service Group has an expected earnings growth rate of 246.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 40% over the last 60 days. CWT currently carries a Zacks Rank #1. California Water Service Group has a beta of 0.48 and a current dividend yield of 2.35%.
MDU Resources Group, Inc. provides value-added natural resource products and related services that are essential for energy transportation and regulated energy delivery services to its customers.
MDU Resources has an expected earnings growth rate of 3.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.3% over the last 60 days. MDU currently carries a Zacks Rank #2. MDU Resources has a beta of 0.77 and a current dividend yield of 2.04%.
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Pinnacle West Capital Corporation (PNW) : Free Stock Analysis Report
Atmos Energy Corporation (ATO) : Free Stock Analysis Report
MDU Resources Group, Inc. (MDU) : Free Stock Analysis Report
California Water Service Group (CWT) : Free Stock Analysis Report
