On Jun 9, we have issued an updated research report on
Consolidated Edison, Inc.
). A stable liquidity position, disciplined investment program in
several projects and positive outcome from rate plans are expected
to boost the utility firm's future results. In addition, payment of
incremental dividends is also appreciable. However, we are
concerned about volatility in commodity prices and stringent
utility regulations, which may cast shadow on the company's future
Consolidated Edison, a Zacks Rank #2 (Buy) stock, reported
favorable result in first-quarter 2014. Quarterly top as well as
bottom line surpassed the Zacks Consensus Estimates. Quarterly
earnings per share and revenues improved year over year, primarily
on the back of changed rate plans of the company's utilities and a
Consolidated Edison maintained a steady liquidity profile backed by
strong cash generation capacity. As of Mar 31, 2014, the company's
cash balance was around $0.1 billion and available fund of $0.83
billion under the commercial paper outstanding. In the first
quarter, Consolidated Edison's operating cash flow increased 175%
to around $0.22 billion from the prior-year comparable level.
A stable financial position enables Consolidated Edison to follow a
systematic capital spending program to execute the smart grid
technologies and energy efficiency programs. These initiatives will
enable the company to provide better services to its customers.
The Utility providers generally recover funds invested earlier in
infrastructure development projects from its customers through
increasing utility rates. In the first quarter, the New York
electricity and gas rate plans of the utilities added $43 million
to the net income. Recouping invested funds from the customers will
encourage Consolidated Edison to invest more on the ventures,
thereby improving reliability.
Consolidated Edison continues to focus on maximizing shareholder
wealth through payment of increased dividend. In Jan 2014, the
company increased its quarterly dividend rate by around 2.4%
sequentially to 63 cents representing 40th consecutive increase in
its annual dividend payout.
On the flip side, Consolidated Edison's operations are highly
regulated. Any modifications in regulations could involve further
investments or induce the company to stop some of its operations,
which in turn may impact its forthcoming performance.
Key Picks from the Sector
Other stocks in the utility sector looking equally good include
NRG Energy, Inc.
). All the stocks carry a Zacks Rank #1 (Strong Buy).
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