Dominion Energy (D): A Utility Leader Poised for Outperformance in 2025

Dominion Energy (NYSE: D) has positioned itself as a utilities sector standout, leveraging robust earnings growth, strategic investments in renewable energy, and a disciplined approach to capital allocation. As the company prepares to report Q2 2025 results on August 1, its trajectory toward outperformance is supported by strong fundamentals, valuation discounts relative to peers, and a clear roadmap for long-term growth.

Earnings Growth: A Strong Foundation
Dominion Energy's first-quarter 2025 results demonstrated resilience and momentum. GAAP net income rose to $646 million ($0.75 per share) from $441 million ($0.50 per share) in Q1 2024, while operating earnings (non-GAAP) surged 69% to $0.93 per share, outpacing analyst estimates. This growth was driven by its regulated utility segments in Virginia and South Carolina, which benefited from rate hikes, favorable weather, and operational efficiency.

• Dominion Energy Virginia contributed $561 million to operating earnings, up $137 million from 2024, fueled by rider equity returns ($133 million) and weather-related demand.
• Dominion Energy South Carolina saw earnings rise $72 million to $152 million, aided by regulatory rate adjustments and customer growth.

The company reaffirmed its full-year 2025 operating EPS guidance of $3.28–$3.52, implying a 22% increase over 2024's $2.77. Analysts project Q2 EPS of $0.77, a 40% year-over-year jump, which—if met—could further cement Dominion's outperformance narrative.

Valuation: Attractive Multiples Amid Growth Prospects
Despite its strong performance, Dominion trades at a forward P/E of 16.87, below the utilities sector average of 18.15. Its trailing P/E of 22.1x (as of July 2025) reflects 2024's lower earnings base, but forward metrics suggest the market is pricing in moderated growth. The PEG ratio of 1.24 aligns with its 5%-7% long-term growth guidance, making the stock a relative bargain compared to peers.

Investors should note:
- Dividend Yield: 2.6%, outpacing the sector average and providing stability.
- Debt Management: While leverage is elevated (debt-to-EBITDA of 6.02x), the company prioritizes capital discipline and has reaffirmed dividend sustainability.

Strategic Advantages: Renewable Leadership and Regulated Stability
Dominion's strategic focus on low-carbon energy positions it to capitalize on decarbonization trends:

1. Offshore Wind Dominance: The $10.8 billion Coastal Virginia Offshore Wind (CVOW) project, 55% complete, aims to supply 2.6 GW of carbon-free power. Though tariff-related costs could add $500 million by 2026, management plans to mitigate risks via domestic sourcing and long-term contracts.
   

2. Regulated Rate Base Growth: 80% of earnings come from regulated utilities, which offer steady cash flows. Recent rate hikes in Virginia and South Carolina reflect regulatory support for capital investments in grid modernization and renewables.

3. Diversified Portfolio: Beyond wind, the company's nuclear, solar, and natural gas assets provide a balanced energy mix, reducing reliance on volatile commodity markets.

Risks to Consider
- CVOW Cost Overruns: Delays or additional tariff-related expenses could pressure margins.
- Regulatory Hurdles: Proposed rate increases for high-energy users in Virginia face regulatory scrutiny, which could impact cash flows.
- Execution in Non-Regulated Segments: The Contracted Energy segment's Q1 decline ($13 million drop) highlights execution risks in nuclear operations.

Investment Outlook: Hold with Upside Potential
Dominion Energy's Q2 results, due August 1, will be a critical catalyst. Meeting or exceeding the $0.77 EPS estimate could reinvigorate investor confidence, while updates on CVOW's progress and regulatory outcomes will shape long-term sentiment.

• Near-Term: Maintain a Hold stance given valuation multiples and execution risks. The stock's historical post-earnings performance (64% win rate since 2022) suggests short-term momentum if results beat expectations.
  
• Long-Term: Dominion's renewable investments and regulated stability make it a defensive play in a sector facing rising decarbonization demands. The Zacks Rank #3 (Hold) reflects cautious optimism, with upside potential if offshore wind milestones are met and tariff risks subside.

Final Take
Dominion Energy's blend of regulated cash flows, renewable growth, and valuation discounts positions it as a utilities sector leader. While risks persist, the company's Q2 results and strategic execution could unlock outperformance in 2025 and beyond. Investors seeking stability with growth potential should monitor the August earnings call closely.