Renewable energy technologies allow converting energy from natural sources such as the wind, tides, sun, and others into utilizable forms such as electricity. According to the Allied Market Research report, the global renewable energy market is expected to grow from $881.7 billion in 2020 to $1,977.6 billion by 2030, showing a CAGR of 8.4% during the forecast period.
Year-to-Date (YTD), the clean energy industry experienced a modest depreciation but outperformed the broader market, as evidenced by the 2.62% decrease in the iShares S&P Global Clean Energy Index ETF (ICLN) compared to SPDR S&P 500 Trust ETF (SPY) 8.36% loss over the same period. Consequently, this pullback allows investors to scoop up shares of renewable energy stocks at lower prices.
With this in mind, today, I am going to analyze and compare two renewable energy stocks, Clearway Energy, Inc. (CWEN) and Brookfield Renewable Corporation (BEPC), to see which is a better investment at current levels.
Clearway Energy is a renewable energy company that has 5,000 net megawatts (MW) of installed wind and solar generation projects and about 2,500 net MW of natural gas generation facilities in the United States. Brookfield Renewable has renewable power assets with an installed capacity of around 19,000 MW, including hydroelectric, wind, and solar power plants.
YTD, CWEN stock has fallen about 5%, while shares of BEPC gained 6% over the same period.
Recent Developments
On February 4th, Brookfield Renewable announced that its board of directors had declared a quarterly dividend of $0.32 per share, payable on March 31st, representing a 5.3% increase from the prior dividend of $0.30. The stock should distribute an annual dividend payout of $1.23, which translates to a dividend yield of 3.28%. Later in April, the company announced its plans to redeem its Series 11 Preferred Units for cash by the end of April. The redemption price will stand at C$25.00.
Recent Quarterly Performance & Analysts Estimates
For its fiscal fourth quarter, ended December 31st, 2021, Clearway Energy’s total revenue grew 13.57% year-over-year to $318 million. This growth was primarily driven by higher revenue from the conventional business segment. However, the company missed the Wall Street revenue estimates by $6.64 million.
In Q4, its net loss decreased to $56 million compared to $73 million in a year-ago quarter. As a result, CWEN disclosed a GAAP Q4 EPS of ($0.07), missing analysts' consensus by -$0.24. The company’s fourth-quarter Adjusted EBITDA has been reported at $250 million, up 9.2% year-over-year. Besides, the company’s forward annual dividend payout currently stands at $1.39, which translates into a dividend yield of 4.05%.
For the next quarter, analysts project CWEN's EPS to come in at ($0.08). Moreover, a $309.18 million average revenue projection for the first quarter of 2022 implies 30.46% year-over-year growth.
On February 4th, Brookfield Renewable Corporation reported earnings for the fourth fiscal quarter of 2021. In Q4, the company’s total revenue increased 14.5% year-over-year to $1.09 billion. Also, the company’s fourth-quarter Normalized Funds From Operations (FFO) per unit came in at $0.41, compared to $0.37 in a year-ago quarter.
Notably, Brookfield Renewable's Adjusted EBITDA stood at $431 million compared to $456 million as of Q4 2020. However, its fourth-quarter net income was $33 million versus a loss of $5 million in a year prior quarter. It is also important to note that the company's long-term average generation increased 4.2% year-over-year to 14,946 GWh, while actual generation advanced 10.10% year-over-year to 14,585 GWh.
Analysts reached a consensus EPS estimate of ($0.05) for the first fiscal quarter of 2022. Additionally, Wall Street expects the company's revenue to increase by 29.27% year-over-year to $1.09 billion in FQ1 2022.
Comparing Options Market Sentiment
Looking at the August 19th, 2022, option chain for CWEN, let's figure out options market sentiment by analyzing the calls/puts ratio. In CWEN's case, the open calls/open puts ratio at the $35.00 strike price comes in at 7.82x, implying a bullish options market sentiment. Also, let's consider the September 16th, 2022, option chain for BEPC to determine the sentiment. The open calls/open puts ratio for BEPC at the $40.00 strike price is 10.81x, indicating a relatively stronger bullish options sentiment.
Conclusion
While both renewable energy companies are expected to benefit from the industry's growth in the long term, I believe that BEPC is currently a better investment based on its superior financials, better growth prospects, and higher open calls/puts ratio.
CWEN shares were unchanged in premarket trading Monday. Year-to-date, CWEN has declined -3.96%, versus a -7.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Oleksandr Pylypenko
Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist.
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