Consolidated Edison Stays Neutral - Analyst Blog
May 15 2013 - 12:15PM
Zacks
We have maintained our Neutral recommendation on
Consolidated Edison Inc. (ED) on May 13, 2013
based on its year-over-year improvement in first quarter 2013
earnings, planned investments and revenue decoupling mechanisms.
However, these positives are partially offset by macro economic and
regulatory risks. The company currently has a Zacks Rank #3
(Hold).
Why the Reiteration?
Consolidated Edison has a stable earnings base from its two
regulated utilities. The company posted first quarter 2013 earnings
of $1.08 per share. The quarterly result surged 6.9% from the
year-ago profit of $1.01. The year-over-year improvement largely
reflects changes in the rate plans of the company’s utility
subsidiaries. Again, the effects of normal winter weather as
against the milder winter in the year-earlier quarter also
contributed to earnings growth.
The company’s Smart Grid technologies and energy efficiency
programs help in enhancing system performance and provide energy
savings for businesses and residential customers. The company plans
to make capital investments of $2.4 billion in 2013. Additionally,
the company is progressing on the regulatory front with its rate
case proceedings.
Consolidated Edison focuses on maximizing shareholder value via
dividend payouts. In Jan 2013, the company increased its quarterly
dividend by 1 cent per share, culminating in an annual rate of
$2.46 per share and a dividend yield of approximately 4.07%. This
marked the company’s 39th consecutive annual dividend increase.
Moreover, the company’s revenue decoupling mechanisms in its
electric and gas rate plans, along with the weather-normalization
clause applicable to its gas business, make its revenues immune to
any volatility in demand.
The positives make for a strong case for ConEdison. We however
prefer to remain on the sidelines given the lurking concerns for
lower demand for electricity, earnings dilutive issuances and
regulatory risks.
Stocks to Consider
Stocks worth considering in the energy space are CPFL
Energia S.A. (CPL), ALLETE, Inc. (ALE),
Empresa Nacional de Electricidad S.A. (EOC). While
CPFL Energia and Empresa Nacional de Electricidad carry a Zacks
Rank #1 (Strong Buy), ALLETE, Inc. holds a Zacks Rank #2 (Buy).
ALLETE INC (ALE): Free Stock Analysis Report
CPFL ENERGI-ADR (CPL): Get Free Report
CONSOL EDISON (ED): Free Stock Analysis Report
ENDESA-CHILE (EOC): Free Stock Analysis Report
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