CenterPoint Energy Inc. (CNP): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
CenterPoint Energy reported encouraging results in the first-quarter 2014 with the top and bottom lines surpassing Zacks Consensus Estimates. Earnings and revenues also improved year over year due primarily to a colder-than-normal winter and higher customer counts. Catalysts for future growth include its favorable liquidity profile backed by a stable cash generation capacity, its disciplined capital spending and the practice of paying regular dividends. The company continues to add customers to its portfolio thanks to the gradual improvement in Houston's economy. Subsequently, this will help the company improve its future cash inflows. However, volatility in wholesale natural gas prices and over-dependence on the retail electric providers for rate payments may cast a shadow on the company's future growth. Thus, we maintain our Neutral recommendation on the stock.

Overview:

Houston, TX-based CenterPoint Energy Inc. (CNP) is a domestic energy delivery company that includes electric transmission & distribution, natural gas distribution and competitive natural gas sales and services operations. The company serves over 5 million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma, and Texas. The company owns interest in a midstream partnership (Midstream Partnership).

CenterPoint Energy's reportable business segments include the following:

Electric Transmission & Distribution: CenterPoint Houston engages in electric utility operations. It is a transmission and distribution electric utility that operates entirely within the state of Texas. On behalf of the retail electric providers (REPs), CenterPoint Houston delivers electricity. CenterPoint Houston provides transmission services under tariffs approved by the Texas Utility Commission. In Electric Reliability Council of Texas, Inc. (ERCOT), the end-users purchase their electricity directly from certificated REPs. CenterPoint Houston delivers electricity to REPs in its certificated service area by carrying lower-voltage power from the substation to the retail electric customer. CenterPoint Houston's operations include construction and maintenance of electric transmission and distribution facilities, metering services, outage response services and call center operations. CenterPoint Houston's electric transmission business, along with those of other owners of transmission facilities in Texas, supports the operation of the ERCOT independent system operator (ERCOT ISO).

Natural Gas Distribution: Natural Gas Distribution consists of intrastate natural gas sales to, and natural gas transportation and distribution for, residential, commercial, industrial and institutional customers. As of Dec 31, 2014, the segment serves customers in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas.

Energy Services: The segment, through CenterPoint Energy Services, Inc. and its subsidiary, CenterPoint Energy Intrastate Pipelines, LLC, provides variable and fixed-priced physical natural gas supplies mainly to the commercial and industrial customers and electric and gas utilities.

Midstream Investments: In Mar 2013, CenterPoint Energy inked a master formation agreement with OGE Energy Corp. and the affiliates of ArcLight Capital Partners, LLC to form Enable Midstream Partners as a private limited partnership. On May 1, 2013, the parties completed the process and Enable Midstream Partners became the owner of considerably all of CERC Corp.'s former Interstate Pipelines and Field Services operations.

Other Operations: This division consists of office buildings and other real estate used for the company's business and other corporate activities that support its business operations.


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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.



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