Pampa Energia S.A. PAM, through its subsidiaries, continues to expand its operations in the generation, transmission and distribution of electricity in Argentina. Its ongoing investments will not only maintain asset quality but also continue to expand its generation portfolio. Given its growth opportunities, PAM makes for a solid investment option in the utility sector.
Let’s focus on the factors that make this Zacks Rank #1 (Strong Buy) stock a strong investment pick at the moment.
Growth Projections & Surprise History
The Zacks Consensus Estimate for PAM’s 2023 earnings per share (EPS) has increased 12.8% to $5.91 in the past 30 days. The same for second-quarter 2023 earnings is pinned at $1.69 per share, indicating year-over-year growth of 40.8%.
The company delivered an average earnings surprise of 129.8% in the last four quarters.
Return on Equity
Return on equity (ROE) indicates how efficiently a company has been utilizing its funds to generate higher returns. Currently, Pampa Energia’s ROE is 21.02%, higher than the industry’s average of 4.92%. This indicates that the company has been utilizing its funds more constructively than its peers in the electric power utility industry.
At the end of first-quarter 2023, PAM’s total debt to capital was 40.61%, much better than industry’s average of 58.54%.
The time to interest earned ratio at the end of the first quarter was 3.4. The ratio, being greater than one, substantiates Pampa Energia’s ability to meet future debt obligations without difficulties.
Systematic Investments in Renewable Projects
PAM invested $250 million for a 260-MW renewable project, which is aimed at meeting the growing customer demand in the industrial area close to Greater La Plata.
Moreover, the company continues to add more renewable power through inorganic growth and development of MAT ER projects. By the end of 2021, it started the construction of PEPE IV. This project has an 81 MW capacity and an approximate $130 million investment.
Once all ongoing expansions are commissioned, Pampa Energia will operate a total projected capacity of 5,505 MW. Almost 482 MW of this capacity will come from wind energy, which will position the company as one of the leading Argentina companies in this segment.
In the past six months, PAM’s shares have risen 49.2% against the industry’s average decline of 6.1%.
Image Source: Zacks Investment Research
Other Stocks to Consider
A few other top-ranked stocks from the same industry are Southern Company SO, Consolidated Edison ED and NiSource Inc. NI, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Southern Company’s long-term (three to five years) earnings growth rate is 4%. The Zacks Consensus Estimate for the company’s 2023 EPS is pinned at $3.61, indicating a year-over-year increase of 0.3%.
Consolidated Edison’s long-term earnings growth rate is 2%. The Zacks Consensus Estimate for the company’s 2023 EPS is pegged at $4.86, implying a 6.81% improvement from the previous year’s figure.
NiSource’s long-term earnings growth rate is 6.9%. The Zacks Consensus Estimate for the company’s 2023 EPS is pinned at $1.57, implying year-over-year growth of 6.8%.
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