We have maintained our Neutral recommendation on
CenterPoint Energy, Inc.
) on Aug 28, 2013 based on the company's diversified risk profile
and stable regulated operations. However, these positives are
partly tempered by the tepid economy and volatility in gas
Why the Reiteration?
CenterPoint Energy's stable and regulated electric power
operations and gas distribution utilities generate a relatively
stable and growing earnings stream. Indeed, during the second
quarter 2013, the company posted strong results based on its
varied portfolio and solid results at its gas distribution
The company's divergent and diversified service territory is
spread across six states that diversify risk and insulate the
company from individual state specific risks. This is
complemented by its expanding pipeline network, the expansion of
its pipeline capacity, and rate base growth.
The company is also proactive on the regulatory front and allows
annual adjustment of distribution rates to reflect changes in
expense, capital investment and customer usage with the help of a
distribution cost recovery mechanism.
Going forward, key growth drivers include the recently formed
master limited partnership between CenterPoint Energy,
OGE Energy Corp.
) and ArcLight Capital Partners, LLC, ongoing infrastructure
development projects, major deals & agreements, a stable
balance sheet and a high dividend yield.
Despite these positives, pending regulatory cases, the tepid
economy, lower demand for electricity, volatility in wholesale
natural gas prices and a significant presence in a hurricane zone
keep us concerned.
Other Stocks to Consider
CenterPoint Energy presently retains a Zacks Rank #3 (Hold).
However, stocks that are worth considering in the space are
Alliant Energy Corp.
), both with a Zacks Rank #2 (Buy).
CENTERPOINT EGY (CNP): Free Stock Analysis
IDACORP INC (IDA): Free Stock Analysis Report
ALLIANT ENGY CP (LNT): Free Stock Analysis
OGE ENERGY CORP (OGE): Free Stock Analysis
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