The friction between Russia and Ukraine has again brought to the forefront the importance of renewable energy sources, as it has become apparent how dependent Europe is on Russia for the supply of fossil fuels.
In reaction, the European Union in early March unveiled a new plan to accelerate near-term deployment for renewables by 20% – a move BofA Securities strategists say boosts the outlook for wind stocks and other green energy investments.
And in the U.S., the federal government recently netted a record $4.37 billion through the sale of more than 488,000 acres in the Atlantic Ocean, off the coasts of New York and New Jersey. The six offshore sites, once developed, are expected to generate around 7 gigawatts (GW) of clean energy.
But this may be only the beginning, given President Joe Biden's plan of deploying 30 GW of offshore wind energy in the U.S. by 2030. Plus, the Energy Information Administration (EIA) expects the the share of solar and wind renewable energy sources will grow from 13% in 2021 to 17% in 2023.
What's more, according to a report by the University of Delaware's Special Initiative on Offshore Wind (SIOW), private-sector investment in U.S. offshore wind could reach $109 billion by the end of the decade.
With that in mind, here are three wind stocks that are well-positioned to harness this growth. To narrow down our list, we turned to the TipRanks database to find names that analysts' are upbeat on. The wind energy stocks featured here either have Buy or Strong Buy ratings from the Wall Street pros or are targeted for significant upside potential over the next 12 months. Let's take a closer look.
Data is as of March 13.
Brookfield Renewable Partners
- Market value: $26.3 billion
- TipRanks consensus price target: $36.36 (11.3% downside potential)
- TipRanks consensus rating: Strong Buy
Brookfield Renewable Partners (BEP, $41.01) operates a publicly traded, pure-play renewable power platform. It is a flagship renewable power company of alternative asset management firm Brookfield Asset Management (BAM). The company's portfolio consists of hydroelectric, wind, solar and storage facilities in North America, South America, Europe and Asia. BEP's expansive portfolio of assets has around 21,000 megawatts (MW) of installed capacity and a 62,000-MW development pipeline.
The company generated its highest-ever normalized funds from operations (FFO) – a key measure of operating performance for the limited partnership – of $1.45 per share in 2021, with total funds from operations of $934 million, up 10% year-over-year (YoY). BEP defines FFO as adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) before the effects of certain non-recurring cash and non-cash items.
While BEP generates most of its cash flows from its hydroelectric assets, its wind and solar assets are also growing quickly. This is indicated by the fact that the company's wind energy assets generated FFO of $396 million in 2021, up 67% year-over-year and comprising 42.4% of BEP's total FFO.
What's more, in 2021, the company diversified its business further, completing the acquisition of more than 300 MW in wind in Asia.
Credit Suisse analyst Andrew M. Kuske thinks BEP is one of the top wind stocks, calling it "a best in class developer of long-dated renewable power, an active capital recycler and a savvy purchaser of distressed assets."
Plus, "an acceleration of development pipeline is core to aiding underlying value creation and de-carbonization transactions may provide additional upside not within our base scenario," the analyst adds.
In addition to an Outperform (Buy) rating on BEP, Kuske has a $46 price target, indicating implied upside of 12.2% from current levels.
And while most Wall Street analysts' price targets have yet to catch up with the stock's nearly 15% year-to-date surge, they are bullish in general. Of the 12 covering analysts, nine have issued Buy calls on BEP over the last three months. See which other analysts are in the BEP Buy camp on TipRanks.
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General Electric
- Market value: $101.4 billion
- TipRanks consensus price target: $112.44 (21.8% upside potential)
- TipRanks consensus rating: Moderate Buy
Industrial conglomerate General Electric (GE, $92.28) is going through a transformation of sorts. Last November, the company announced a plan to split into three investment-grade public companies, comprising its aviation business, healthcare and energy businesses.
While the healthcare segment is expected to be spun off in early 2023, its energy division – which includes its renewable energy, power and digital businesses – will spin off in early 2024. Following these spinoffs, GE will be purely an aviation-focused company.
In its recent investor update, GE said it expects supply-chain issues, labor availability and inflation to persist in the first half of fiscal 2022 year, even as demand remains strong across its businesses. As a result, the company anticipates that these challenges will pressure its profit and free cash flows in the first half of 2022.
When it comes to wind energy stocks, GE's renewables business consists of offshore wind energy – which is still pre-revenue but growing – grid and onshore wind (the largest division of the three). The company foresees its renewables business delivering revenue growth in "low single-digits" this year, with an improvement in profitability.
So, what are GE's prospects when it comes to its renewables business, and more specifically, wind energy?
"[W]hen you look medium to long term, we continue to be big believers in the demand environment for onshore wind, and we think we're well positioned to be an important part of that going forward," said CEO Larry Culp in the company's fourth-quarter earnings call.
While RBC Capital analyst Deane Dray (Outperform) did trim his growth and margin estimates for GE following the company's investor update, the analyst remains positive about the stock. This is because Dray perceives potential upside to GE's break-up story, "from faster timing of transactions than originally targeted and prospects for potential value-unlocking asset sales/divestitures."
The analyst's price target of $113 (up from an earlier $108) values the company on a sum-of-parts basis and could see GE deliver a 22.5% return from its current price.
A solid 10 out of 14 analysts covering GE have rated the stock a Buy, versus only four Hold ratings and no Sells. See GE's stock full analyst forecast on TipRanks.
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TPI Composites
- Market value: $525.0 million
- TipRanks consensus price target: $19.14 (35.6% upside potential)
- TipRanks consensus rating: Hold
TPI Composites (TPIC, $14.12) is an Arizona-based manufacturer of composite wind blades, catering to the wind energy market. In 2020, the company's wind blades comprised around 32% of all those sold onshore globally, on a MW-basis, excluding those sold in China.
Similar to its fellow wind energy stocks, macro headwinds persisted for TPI Composites in the fourth quarter and are likely to carry over into 2022. However, the company still achieved record net sales in 2021 of $1.73 billion versus $1.67 billion in 2020.
Interestingly, substantially all TPI Composites' revenues in 2021 came from three primary wind blade customers: GE Wind, Vestas (VWDRY) – a member of the Kiplinger ESG 20 – and Nordex (NRDXF). These three made up 24.7%, 40.4% and 22.4%, respectively, of TPIC's total net sales in 2021.
Another key highlight for the company in Q4 was that it signed an agreement of "meaningful" size for a passenger electric vehicle (EV) platform to supply composite components.
However, the company's outlook for this year remains muddy. "As we look to 2022, we expect the operating environment to continue to be challenged," said Bill Siwek, president and CEO of TPI Composites, in the company's fourth-quarter earnings report press release. "With that said, the long-term drivers for wind both domestically and globally remain intact and we are well positioned to capture that growth in the future.”
It was this lack of visibility for 2022, due to macro pressures, that has kept Stifel analyst Stephen Gengaro (Hold) sidelined on the stock. Still the analyst admits there were "some positive developments during the fourth quarter," including the company adding four new lines in China for top customer Vestas and continued strong global service growth. He also has a $27 price target for TPIC, which indicates implied upside of 91.2%.
And TPIC Composites actually started 2022 on our short list of stocks to sell. UBS analysts, for instance, had just reduced their 12-month price targets to $20 per share from $44. TPIC has since fallen to $20, then cratered to as low as $9.23. Now, a consensus price target of $19 per share sits 35.6% higher than current prices. The upside potential to the average price target suggests that the stock could be undervalued at current levels.
Two of seven analysts surveyed by TipRanks categorize TPIC stock as a Buy. Check out their price targets and analysis at TipRanks.
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