We have maintained our Neutral recommendation of
) 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
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
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
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.
Consolidated Edison Inc.
DTE Energy Company
), all with a Zacks Rank #2 (Buy).
DTE ENERGY CO (DTE): Free Stock Analysis
CONSOL EDISON (ED): Free Stock Analysis
ALLIANT ENGY CP (LNT): Free Stock Analysis
PG&E CORP (PCG): Free Stock Analysis
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