PG&E Corp. Stays Neutral - Analyst Blog

By
A A A

We have maintained our Neutral recommendation of PG&E Corp. ( PCG ) on Jun 24, 2013 based on the company's supportive regulatory environment, diversification into alternative power sources and infrastructure improvement programs partially offset by soft first quarter performance, accidental charges and fluctuation in prices.

Why the Reiteration?

PG&E Corporation has a solid portfolio of regulated utility assets that offer a substantial long-term growth potential. The company operates in the regulatory progressive state of California. The California Public Utilities Commission (CPUC) provides the company with ample regulatory support through progressive mechanisms like decoupling. Decoupling protects the top line of the company against risks arising from lower customer usage, weather vagaries and volatility in prices.

PG&E Corporation strives to optimize generation margins by improving its cost-structure, performance and reliability of its nuclear as well as fossil units. Going forward, we expect the company's earnings growth to be driven by favorable decisions from CPUC and Federal Energy Regulatory Commission. Long-term supply agreements, focus on power generation from renewable sources and modernization of infrastructure would result in rate base growth.

Moreover, the company's strong balance sheet and cash flows provide substantial financial flexibility and cushion in the present challenging business environment. It has been consistently paying dividends and currently pays an annual dividend of $1.82 per share. This brings the average dividend yield to 4.1%.

Despite these positives, the company's soft first quarter performance as a result of lower regulated return on equity and higher debt, the present unfavorable macro backdrop, headwinds in the California economy, tepid demand for electricity, accidental charges and power-price volatility remain matters of concern for the company.

Other Stocks to Consider

PG&E Corp. currently has a Zacks Rank #3 (Hold). Stocks that are well placed in the energy space are Alliant Energy Corp. ( LNT ), Consolidated Edison Inc. ( ED ) and DTE Energy Company ( DTE ), all with a Zacks Rank #2 (Buy).



DTE ENERGY CO (DTE): Free Stock Analysis Report

CONSOL EDISON (ED): Free Stock Analysis Report

ALLIANT ENGY CP (LNT): Free Stock Analysis Report

PG&E CORP (PCG): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



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.



This article appears in: Investing , Business , Stocks

Referenced Stocks: DTE , ED , LNT , PCG

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

100%
100%
100%
100%

Most Active by Volume

85,467,945
  • $16.74 ▼ 0.30%
83,530,302
  • $12.49 ▲ 85.31%
68,697,805
  • $42.55 ▼ 0.77%
58,516,965
  • $101.63 ▼ 0.03%
49,234,469
  • $74.58 ▼ 3.74%
39,038,134
  • $8.56 ▲ 2.27%
37,813,410
  • $49.38 ▼ 5.24%
37,004,144
  • $46.24 ▼ 0.97%
As of 9/15/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com