NG., DRX, CNA: Energy stocks to watch as household struggle to cut costs

The headaches caused by the increasing cost-of-living crisis are increasing by the day. Not only is it creating regional inequalities across the UK, but almost one in eight UK households are now staring at a situation where they will struggle to contain the growing annual energy bills this autumn.

According to the latest rebuilding Britain index of 20,000 people by Legal & General, over a quarter of families with less than £20,000 income are concerned about falling into increasing debt in the face of soaring bills.

Families across the country are currently faced with a situation of containing growing costs, with almost 50% worried about reducing their rent or mortgage payments over the next 12 months.  Meanwhile, Londoners were the most confident, with 72% believing they could maintain their living standards.

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Food and energy prices continued to send Britain’s annual inflation rate to a 40-year high of 9.4% in June, with many economists expecting inflation to jump as high as 12% this autumn. Further, households are expected to face annual energy bills of up to £3,850 by the start of next year and remain above £3,500 by 2024. This figure is three times is higher than what they were paying at the beginning of 2022.

According to the National Grid’s Electricity System Operator (ESO), The UK’s energy supply might be tight this winter due to uncertainty about oversupplied Russian oil and gas to Europe. By the end of this year, margins might narrow significantly.

The UK government has formulated a plan as to how citizens will be entitled to receive £400 in energy bill discounts from October. The support will be spread across six installments over six months, thereby benefitting around 29 million households. Further, in October and November, eligible households will receive a £66 discount on their energy bills. Another set of eligible families will receive a £67 monthly discount from December to March 2023. 

According to the recent data from the Bank of England (BoE), borrowing in the UK rose by an additional £1.8 billion in consumer credit last month, which is the fastest rate in three years and was up from a £900 million increase in May.      

Let’s deep dive into three FTSE-listed energy utility stocks.  

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Let’s deep dive into three FTSE listed energy utility stocks.  

National Grid Plc (LON: NG.)

National Grid is an FTSE 100 constituent which boasts of a market cap of £41,296.49 million as of 1 August 2022. The firm which is a global distributor of electricity and gas was trading at GBX 1,129.50 and was down by 0.18%, as of 08:10 AM (GMT+1) on Monday. NG.’s EPS stood at 0.65 with a one-year return of 22.34%.

Drax Group Plc (LON: DRX)

Drax Group, the FTSE 250 constituent, on Monday was trading at GBX 776.00 and was down by 1.08%, as of 08:10 AM (GMT+1). With a market cap of £3,143.64 million as of 1 August, the earnings per share of the DRX stood at 0.20. DRX returns were also impressive as its YTD stood at 28.60%.

Centrica Plc (LON: CNA)

Centrica is an FTSE 100 constituent, with a market cap of £5,180.94 million as of 1 August. With the Earning Per Share of 0.21, its shares are trading at GBX 88.14, up by 0.50%, as of 08:10 AM (GMT+1) on 1 August. Its 12-month return has appreciated 96.27%, and its year-to-date basis stood at 24.34%.

Note: The above content constitutes a very preliminary observation or view based on market trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.