NV Energy Inc.
) has been bucking the weak macro backdrop and moving higher since
the end of April, capitalizing on the resilience of its regulated
business. This Zacks #2 Rank (Buy) got a further boost with the
announcement of a 31% dividend hike and strong first quarter
profit. Moreover, this defensive utility stock currently enjoys a
healthy dividend yield of 3.9% and is expected to deliver earnings
growth of 61.7% in the current fiscal year.
Fiscal 2012 First-Quarter
On May 8, NV Energy reported fiscal first-quarter 2012 earnings of
5 cents per share, beating both the Zacks Consensus Estimate of 3
cents and the year-ago earnings of a penny. Despite a lower
top-line, the robust quarterly performance was driven by higher
gross margins, a lower fuel cost and increased customer count.
Operating income rose 30.6% year over year to $96.5 million.
Net sales, however, went down 4.6% year over year to $611.4
million. The top-line also missed the Zacks Consensus Estimate of
$611 million by 7.6%.
On the other hand, NV Energy affirmed fiscal 2012 earnings per
share in the range $1.15 to $1.25, which represents year-over-year
growth of 55.4% to 68.9%.
Estimates for NV Energy have inched upward in the last 60 days. The
Zacks Consensus Estimate for fiscal 2012 increased 3.5% to $1.20,
indicating a year-over-year growth of 61.7%. The bullishness about
earnings growth going forward is based upon expected volume growth,
falling interest overhead, and the inclusion of the Harry Allen
combined cycle natural gas plant in rate base.
Boosted by the planned merger of its two regulated subsidiaries in
2013 (Nevada Power Company and Sierra Pacific Power Company),the
estimate for fiscal 2013 has increased 4.2% over the same timeframe
to $1.25 per share, representing a projected year-over-year growth
of nearly 4.5%.
Dividend Portraying Strength
NV Energy last raised its quarterly dividend in May 2012 by 31% to
17 cents per share. Stable cash flow and fewer capital expansion
plans would free up substantial funds for dividends going forward.
This leaves room for further upside. Management also expects to
dish out approximately 55% - 65% of future earnings as dividends.
The company has been paying regular incremental dividends since
2007, currently yielding a strong 3.9%. This is more than twice the
current yield on the 10-year Treasury Notes.
Valuation of NV Energy looks reasonable. The current forward P/E of
14.4x implies a premium of 6.1% to the peer group average of 13.6x.
On a price-to-book basis, the shares are currently trading at 2.7x,
versus the peer group average of only 4.9x. Given the company's
compelling fundamentals, the valuation looks reasonable. Moreover,
its long-term estimated EPS growth rate of 14.0% presents a window
of opportunity for investors seeking income and growth.
The stock has been consistently trading above its 50-day moving
average since April 16, 2012. Average volume is decent at 708.3K.
NV Energy has also outperformed the S&P 500 since May 9, 2012.
Over the past three months, the stock gained roughly 10.8% compared
with the S&P 500's loss of 3.1%.
NV Energy's fortunes are tied to the overall health of a slowly
recovering Nevada economy in general and the Las Vegas housing and
gaming markets in particular. The company is moving ahead with its
strong cash flow, incremental dividend and lower capital
expenditure needs in the near-term. The planned merger of its two
regulated subsidiaries should continue to shore up shareholder
Incorporated in 1983 and headquartered in Las Vegas, Nevada, NV
Energy is an investor-owned holding company. The vertically
integrated electric utility has a market cap of $4.15 billion, and
serves about $2.5 million Nevadans throughout about 90% of the
state. Its main regulated subsidiary, Nevada Power Company, serves
approximately 830,000 electric customers in Las Vegas and its
adjoining area. While another regulated subsidiary, Sierra Pacific
Power Company, caters to approximately 376,000 electric customers
and around 151,000 gas customers in other parts of the state.
NV ENERGY INC (NVE): Free Stock Analysis Report
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