Calpine Corp. Down to Strong Sell - Analyst Blog

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On Sep 25, 2013, Zacks Investment Research downgraded electric utility Calpine Corporation ( CPN ) to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Calpine continues to disappoint market expectation, falling short of the Zacks Consensus Estimate in the last three quarters with an average earnings miss of 235.6%. The uninspiring performance has led to downward estimate revisions.

On Jul 25, Calpine reported second-quarter loss per share of 8 cents, widely missing the Zacks Consensus Estimate of earnings of 8 cents by 200%. The company's third quarter results slated to be released on Nov 5 do not look promising either in the light of recent trends.

In the second quarter, Calpine registered a year-over-year decline in commodity margin in all its services territories. The softer results were primarily due to lower generation output resulting from milder weather and a reversal of coal-to-gas switching in the wake of higher natural gas prices.

Calpine smarting under weak financial results is undertaking a number of initiatives. In Aug 2013, the company started operating two combined-cycle natural gas-fired power generation plants, which together have a generation capacity of more than 900 megawatts. However, it appears that Calpine will have to take more proactive measures to turn the tide. Long-term sales growth is presently pegged at -9.86%.

The Zacks Consensus Estimate for 2013 decreased 13.2% in the last 60 days to 53 cents per share. For 2014, the Zacks Consensus Estimate decreased 8.3% in the last 60 days to 84 cents per share.

Not all electric utilities are performing as poorly as Calpine Corporation. Other utility stocks performing well, with a favorable Zacks Rank, are UNS Energy Corporation ( UNS ), The AES Corporation ( AES ) and Brookfield Infrastructure Partners L.P. ( BIP ). UNS Energy has a Zacks Rank #1 (Strong Buy) while AES Corporation and Brookfield Infrastructure Partners retain a Zacks Rank #2 (Buy).



AES CORP (AES): Free Stock Analysis Report

BROOKFIELD INFR (BIP): Free Stock Analysis Report

CALPINE CORP (CPN): Free Stock Analysis Report

UNS ENERGY CORP (UNS): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AES , BIP , CPN , UNS

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