) hit a 52-week high of $48.64 on Jun 20. In fact, this San
Francisco, CA based utility has seen its stock price climb 19.6%
since the beginning of the year. This price appreciation can be
attributed to a solid portfolio of regulated utility assets as well
as its electricity distribution and transmission projects.
Why the Bullishness?
PG&E Corporation's regulated utility assets offer a stable
earnings base and substantial long-term growth potential. The
company strives to optimize generation margins by improving its
cost structure through its primary operating unit, Pacific Gas and
Electric Company, in northern and central California.
The company has a number of investment projects aimed at upgrading
or expanding its infrastructure. Under its capital spending
program, PG&E plans to invest $5-$6 billion in 2014, a major
portion of which is apportioned to electricity distribution and
transmission projects. These are expected to earn rate-based growth
In late 2013, PG&E Corporation, MidAmerican Transmission LLC,
and Citizens Energy Corporation were selected by the California
Independent System Operator (CAISO) to construct a new 70-mile
transmission line. Moreover, the company replaced around 100,000
feet of underground cable, mainly in San Francisco and East Bay,
100,686 feet of overhead wire, and installed or replaced 19
distribution substation transformer banks.
Again, PG&E generates over 50% of its power from non-polluting
energy sources, like nuclear. As far as gas projects are concerned,
the company completed the Centerline survey of its entire gas
transmission system in 2013. It also delivered 17,030 gigawatt-hour
of electricity though renewable fuel-based generation facilities
last year. This will help the company to meet the increasingly
stringent renewable standards.
Though the company displayed mixed financial results in the first
quarter 2014, we are hopeful that its constant gas and electric
infrastructure upgrade efforts will lend stability to its earnings
In the first quarter of 2014, PG&E missed the earnings
expectation primarily because of the delay in rate relief related
to its 2014 general rate case (GRC). Once the GRC is decided, rates
will be retroactive to Jan 1, 2014,thereby enabling the company to
recover its costs incurred year to date..
Other Stocks to Consider
PG&E currently has a Zacks Rank #3 (Hold). However,
Companhia Paranaense de Energia
NRG Energy Inc.
), all with a Zacks Rank #1 (Strong Buy), are good investment bets
in the utility space.
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