On Apr 10, Zacks Investment Research upgraded
Chesapeake Utilities Corp.
) to a Zacks Rank #1 (Strong Buy).
ATMOS ENERGY CP (ATO): Free Stock Analysis
CHESAPEAKE UTIL (CPK): Free Stock Analysis
QUESTAR (STR): Free Stock Analysis Report
SOUTHWEST GAS (SWX): Free Stock Analysis
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Why the Upgrade?
The company has registered earnings surprises in the last three
quarters of 2012 with an average beat of 28.7%. In fourth quarter
2012, earnings of $1.02 per share surpassed the Zacks projection
of 86 cents by 18.6%.
Chesapeake Utilities continues to make investments to upgrade and
maintain its natural gas distribution and transmission systems.
Besides organic investments, acquisitions also allow this energy
company to expand operations and the customer base. The company
has spent $227 million over the last five years and has allocated
a further $112.3 million for 2013.
The long-term plan to expand its intrastate and interstate
pipeline systems will allow the company to cater to new markets
and further expand its natural gas distribution operations.
We note that the major portion of the company's capital
expenditure is directed towards the regulated energy operations.
Operating income from the regulated business was up 7% year over
year to $47 million in 2012. We believe investments in regulatory
assets will ensure a steady flow of revenue and strengthen its
The present valuation also makes the stock attractive. Shares of
Chesapeake Utilities currently trade at 15.33x 12-month forward
earnings, a 13.4% discount to the peer group average of 17.71x.
Its price-to-book ratio of 1.88 is at a 5.5% discount to the peer
group average of 1.99.
The Zacks Consensus Estimate for 2013 of $1.51 per share
increased 4.4% in the last 60 days, which reflects year-over-year
growth of 9.53%. Over the last 60 days, the Zacks Consensus
Estimate for 2014 increased 4.87% to $3.44 per share, reflecting
growth of 4.94% year over year.
Other Stocks to Consider
Other than Chesapeake Utilities Corp, a few other gas utilities
are also performing well and have a favorable Zacks Rank. We note
that the gas utilities are expected to do well going forward as
natural gas is increasingly used for power generation. The stocks
also worth a look are
Atmos Energy Corporation
Southwest Gas Corporation
). All of them presently have a Zacks Rank #2 (Buy).