Could these ASX 200 shares be most vulnerable to rising energy costs? Macquarie weighs in

These companies could be in for an earnings shock…

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Unless you have been living under a rock, you are likely aware of the precarious position in which the Australian energy market is perched. What may not be as obvious is how might the situation impact shares inside the S&P/ASX 200 Index (ASX: XJO).

As I dug into last week, the energy sector is caught in the mother of all storms. A global mismatch of supply and demand has led to an almighty squeeze on electricity and gas prices. Notably, a cold snap at the beginning of the month pushed Victorian gas prices up more than 50 times their typical range.

Unfortunately, the everyday Aussie’s bank account will feel the effects of rising prices in the next billing cycle. But, what about the investors in those ASX 200 shares — where could the pain be felt the most?

What’s going on in energy?

Australia’s recently appointed minister for climate change and energy, Chris Bowen, has said there is “no silver bullet” for unusually high energy prices. The minister hinted at a need to beef up the country’s supply — entailing more transmission, renewables, and storage.

However, addressing the shortfall in energy supply will be no small task. In reality, energy infrastructure can take years to design and construct. This means consumers and businesses could be subjected to elevated prices for a prolonged period.

As a result, the team at Macquarie Equities has run the numbers on which companies are most exposed to this headwind. What is most unsettling is the breadth of which the analysts believe the damage could cover. For instance, all of the following sectors were listed as at-risk areas:

Could these ASX 200 shares be getting zapped?

In the note published by Macquarie Equities, these specific ASX 200 shares are described as having a “high electricity price exposure”:

ASX-listed companyShare pricePerformance YTD
Woolworths Group Ltd (ASX: WOW)$34.56-10.2%
Coles Group Ltd (ASX: COL)$17.53-2.1%
Costa Group Holdings Ltd (ASX: CGC)$3.09-0.6%
Inghams Group Ltd (ASX: ING)$2.89-20.1
NextDC Ltd (ASX: NXT)$10.64-17.1%
TPG Telecom Ltd (ASX: TPG)$5.83-1.2%
Evolution Mining Ltd (ASX: EVN)$3.46-15.1%
Newcrest Mining Ltd (ASX: NCM)$23.20-5.3%
Rio Tinto Limited (ASX: RIO)$115.0615.4%
Boral Ltd (ASX: BLD)$2.99-51.8%
Adbri Ltd (ASX: ABC)$2.62-9.3%
CSR Ltd (ASX: CSR)$4.37-28.1%
BlueScope Steel Ltd (ASX: BSL)$17.38-19.1%
Viva Energy Group Ltd (ASX: VEA)$2.9827.4%
Orora Ltd (ASX: ORA)$3.786.5%
Star Entertainment Group Ltd (ASX: SGR)$2.80-26.3%
Crown Resorts Ltd (ASX: CWN)$13.060.5%
Charter Hall Retail REIT (ASX: CQR)$4.01-8.5%
Data as at 3:15 AEST

Highlighting the risk to these ASX 200 shares, Macquarie equity strategist Matthew Brooks stated:

We are yet to see the downgrades that tend to occur in a weak economy, and it is typically cyclical sectors that see larger cuts. The surge in electricity costs adds to the earnings risk already present in a range of cyclicals.

Drilling down into the particulars, Brooks noted that Boral and Coles may not be as susceptible to the impacts as others. The first company commands a level of pricing power, while the supermarket giant is somewhat protected by hedging.

Furthermore, NextDC’s earnings per share (EPS) is heavily exposed to electricity prices due to its power-hungry data centres. However, the strategist expects this ASX 200 share will pass on the amplified costs to customers.

Motley Fool contributor Mitchell Lawler has positions in CSR Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended COLESGROUP DEF SET. The Motley Fool Australia has recommended COSTA GRP FPO and TPG Telecom Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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