AES vs. Entergy: Which Utility Stock Offers Better Growth?

The demand for clean electricity is accelerating worldwide, supported by a combination of long-term structural trends and rapid technological advances. As this need intensifies, utility companies like AES Corporation AES and Entergy Corporation ETR are becoming increasingly attractive investment opportunities due to their strong positioning in the energy transition.

A key growth driver is the rapid proliferation of large, artificial intelligence-powered data centers, which require substantial and consistent electricity supplies to operate high-performance computing systems and maintain continuous cooling operations, thereby placing greater demand on the grid.

At the same time, the transition toward renewable energy is reshaping the U.S. utilities landscape, pushing companies beyond their traditional revenue-generating roles. Supportive climate policies and federal incentives are accelerating this shift, positioning leading utilities for stable, long-term growth while offering investors a comparatively low-risk avenue to gain exposure to the expanding clean energy sector.

Both companies are balancing regulated operations with investments in cleaner energy infrastructure.

Let's compare the two stocks' fundamentals to find out which one is a better investment pick at present.

Factors Acting in Favor of AES Stock

AES is taking advantage of the global transition to renewable energy by making strategic investments in clean energy solutions, such as energy storage and utility-scale renewables, which offer a long-term growth opportunity. In addition to leveraging innovation and artificial intelligence (AI) to accelerate clean energy advancements, the company is benefiting from its global diversification, which may lead to more stable sales and operational recovery.

To promote clean energy adoption, AES has also been rapidly retiring its coal-fired units, reducing carbon emissions from its portfolio. The company has made significant progress in its coal generation exit initiatives and intends to retire a substantial portion of its remaining coal facilities.

Factors Acting in Favor of ETR Stock

Entergy is strategically investing in renewable operations to modernize its portfolio, meet rising energy demand, and achieve net-zero carbon emissions by 2050. The company plans to invest nearly $43 billion between 2026 and 2029 for infrastructure improvements, with a strong focus on renewable energy expansion and modernization.

ETR is also using modern technologies to improve its renewable energy system operations. By applying AI, the company can more accurately forecast electricity demand, optimize power generation, detect equipment issues early and manage the grid more efficiently. Battery storage systems enable the company to store excess renewable energy during periods of high production and release it when demand rises or generation declines.

How Do Zacks Estimates Compare for AES & ETR?

The Zacks Consensus Estimate for AES’ 2026 earnings per share (EPS) indicates an increase of 0.84% over the past 60 days. AES’ long-term (three to five years) earnings growth rate is 11.17%.
 

The Zacks Consensus Estimate for Entergy’s 2026 EPS indicates an increase of 0.23% over the past 60 days. ETR’s long-term earnings growth rate is 11.5%.

AES & ETR’s Return on Equity (ROE)

ROE measures how efficiently a company is utilizing its shareholders’ funds to generate profits. AES’ current ROE is 18.83% compared with ETR’s 10.89%. The industry has an ROE of 10.7% at present.

AES & ETR’s Price Performance

In the past three months, shares of AES and ETR have increased 16.8% and 9.5%, respectively.

AES & ETR’s Dividend Yield

Utility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for AES is 4.33% compared with the Zacks S&P 500 composite’s average of 1.08%, and the same for Entergy is 2.42%.

Valuation for AES & ETR

AES shares trade at a forward 12-month Price/Earnings (P/E F12M) of 6.74X compared with Entergy’s 23.61X, making AES relatively more attractive from a valuation standpoint.

AES or ETR: Which Is a Better Choice Now?

Both AES and Entergy are investing in cleaner energy infrastructure to reduce carbon emissions and align with the energy transition. In short, they are maintaining steady, regulated income streams while positioning themselves for long-term growth through clean energy initiatives.

Our current preference is AES, given its better earnings growth, higher ROE, more attractive dividend yield and better valuation than ETR. Both AES and Entergy have a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research