We have maintained our Neutral recommendation on
Consolidated Edison Inc.
) on May 13, 2013 based on its year-over-year improvement in
first quarter 2013 earnings, planned investments and revenue
decoupling mechanisms. However, these positives are partially
offset by macro economic and regulatory risks. The company
currently has a Zacks Rank #3 (Hold).
Why the Reiteration?
Consolidated Edison has a stable earnings base from its two
regulated utilities. The company posted first quarter 2013
earnings of $1.08 per share. The quarterly result surged 6.9%
from the year-ago profit of $1.01. The year-over-year improvement
largely reflects changes in the rate plans of the company's
utility subsidiaries. Again, the effects of normal winter weather
as against the milder winter in the year-earlier quarter also
contributed to earnings growth.
The company's Smart Grid technologies and energy efficiency
programs help in enhancing system performance and provide energy
savings for businesses and residential customers. The company
plans to make capital investments of $2.4 billion in 2013.
Additionally, the company is progressing on the regulatory front
with its rate case proceedings.
Consolidated Edison focuses on maximizing shareholder value via
dividend payouts. In Jan 2013, the company increased its
quarterly dividend by 1 cent per share, culminating in an annual
rate of $2.46 per share and a dividend yield of approximately
4.07%. This marked the company's 39th consecutive annual dividend
Moreover, the company's revenue decoupling mechanisms in its
electric and gas rate plans, along with the weather-normalization
clause applicable to its gas business, make its revenues immune
to any volatility in demand.
The positives make for a strong case for ConEdison. We however
prefer to remain on the sidelines given the lurking concerns for
lower demand for electricity, earnings dilutive issuances and
Stocks to Consider
Stocks worth considering in the energy space are
CPFL Energia S.A.
Empresa Nacional de Electricidad S.A
). While CPFL Energia and Empresa Nacional de Electricidad carry
a Zacks Rank #1 (Strong Buy), ALLETE, Inc. holds a Zacks Rank #2
ALLETE INC (ALE): Free Stock Analysis Report
CPFL ENERGI-ADR (CPL): Get Free Report
CONSOL EDISON (ED): Free Stock Analysis
ENDESA-CHILE (EOC): Free Stock Analysis
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