We have maintained our Neutral recommendation on
Public Service Enterprise Group Inc.
). The company currently has a Zacks Rank #3 (Hold).
Why the Reiteration?
Despite the adverse influence of low energy prices and Superstorm
Sandy, earnings for Public Service Enterprise surpassed the Zacks
Consensus Estimates in the fourth quarter of 2012. This
demonstrates management's initiatives and measures taken up to
improve financial stability and reduce the overall risk profile
of the company.
Moreover, Public Service Enterprise Group's solid portfolio of
regulated and non-regulated utility assets helps it in offering a
stable earnings base and substantial long-term growth potential.
Going forward, we expect the low-cost nuclear fleet, assumed rate
relief and added generating capacities to drive Public Service's
Initiatives taken by the company to improve earnings and offset
pressure on margins due to low commodity prices include
opportunistically monetizing assets that are no longer a
strategic fit, significantly hedging future generation business
and paying down debt.
Public Service has been pursuing growth opportunities in the core
U.S. market and increasing capital allocation in projects that
provide good risk-adjusted returns. Over the next 10 years,
the company intends to invest $3.9 billion in order to protect
and strengthen its electric and gas systems against increasingly
frequent severe weather conditions. These investments will help
the company in increasing the pace of earnings growth. Moreover,
it will also help in offsetting the decline in earnings in the
merchant power segment.
However, we remain concerned about the increasing cost of coal,
higher pension & financial costs, power-price volatility and
the extent of restoration costs for Sandy.
Other Stocks to Consider
Other stocks to consider are
Otter Tail Corporation
The AES Corporation
DTE Energy Company
). While Otter Tail carries a Zacks Rank #1 (Strong Buy), AES
Corp. and DTE Energy hold a Zacks Rank #2 (Buy).
AES CORP (AES): Free Stock Analysis Report
DTE ENERGY CO (DTE): Free Stock Analysis
OTTER TAIL CORP (OTTR): Free Stock Analysis
PUBLIC SV ENTRP (PEG): Free Stock Analysis
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