On Mar 4, 2014, the shares of
Black Hills Corporation
) climbed to its 52-week high of $57.88, primarily on the back of
improvement in fourth-quarter 2013 earnings, a systematic organic
and inorganic growth strategy, and payment of incremental
dividend. The share price finally closed at $57.54, up 2.1% from
the previous day's closing.
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In fourth-quarter 2013, Black Hills Corp.'s earnings edged up
around 2.9% year over year to 70 cents per share. Quarterly
result also surpassed the Zacks Consensus Estimate by 6.1%. The
surge in earnings was mainly driven by colder-than-normal weather
and higher revenues as a result of strong contribution from the
Electric Utilities, Gas Utilities, and Oil and Gas segments. The
company's earnings surpassed the estimates in 3 out of the last 4
quarters, with average surprise of 7.4%.
We note that Black Hills Corp. continues to exhibit its
efficiency in terms of improving operating cash flow. In 2013,
the company's cash flow from operating activities jumped 2.4% to
$324.6 million from $317 million in the year-ago comparable
A strong cash generation capacity supports Black Hills Corp.'s
expansion program. In 2013, the company invested $379.5 million
as capital expenditures and for asset acquisition activities. A
9.1% year-over-year increase in capital expenditures was
primarily due to construction of a 132-megawatt natural gas-fired
electric generating facility, Cheyenne Prairie.
On the inorganic front, Black Hills Corp. inked an agreement with
MGTC, a unit of
Anadarko Petroleum Corporation
), to acquire the latter's gas transmission and distribution
utility assets for $6 million. The transaction is subject to
customary closing adjustments.
These initiatives will enable the company to improve its scale of
operations and add new customers to its portfolio, thereby
boosting cash inflow.
In addition to expansion of utility portfolio, Black Hills Corp.
is also expanding its operations under the oil and gas segment.
The company completed two horizontal wells in the Mancos Shale
formation in the southern Piceance Basin.
Apart from investing substantially in growth projects, Black
Hills Corp. is also taking initiatives to improve shareholders'
wealth. The company recently raised its quarterly dividend rate
by a penny to 39 cents from the earlier payout. On an annualized
basis, the new dividend rate will be $1.56 per share.
Black Hills Corp. currently has a Zacks Rank #2 (Buy). Some other
stocks worth considering in the utilities industry include
Public Service Enterprise Group Inc.
). While Public Service Enterprise holds a Zacks Rank #1 (Strong
Buy), Avista Corporation carries a Zacks Rank #2 (Buy).