Strong Buy on Laclede Group Inc. - Analyst Blog


On Mar 21, Zacks Investment Research upgraded The Laclede Group Inc. ( LG ) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

The company has been performing well and has registered earnings surprises in the last three quarters with an average beat of 52.07%. Net income in the first quarter of fiscal 2013 improved 13% year over year on the back of higher income from its Gas Utility segment. The long-term expected earnings growth rate for this stock is 3.0%.  

The company has been working to maintain a strong financial position with its current ratio presently at 1.45. Laclede Group was able to lower its long-term debt by 100 basis point to 37%. Net cash from operating activities in the first quarter of fiscal 2013 was up 6.5% y/y to $37.5 million.

The Laclede Group is set to acquire all the assets and liabilities of Missouri Gas Energy and New England Gas Company from Southern Union Company for $1.035 billion.  This acquisition is a big positive for the company and its customer base would reach 1.2 million from 630,000 presently. The transaction is expected to close before the end of the third quarter of calendar 2013.

The Laclede Group continues to invest in development and maintenance of its existing systems. The first quarter of fiscal 2013 saw capital investment increasing 51.4% year over year to $27.7 million. Technology platform upgrades and the accelerated replacement of parts of its distribution system will allow the group to serve its customers better.

The Zacks Consensus Estimate for fiscal 2013 of $2.86 per share reflects year-over-year growth of 2.5%. For fiscal 2014, the Zacks Consensus Estimate of $3.02 per share reflects projected growth of 5.5% year over year.

Other Stocks to Consider

Other than The Laclede Group Inc., a few other natural gas utilities are also performing well and have a favorable Zacks Rank. We note that in the U.S. usage of natural gas is on the rise due to its clean burning nature and wide availability.  The stocks worth considering are Southwest Gas Corporation ( SWX ), Chesapeake Utilities Corporation ( CHK ) and Atmos Energy Corporation ( ATO ). All of them presently have a Zacks Rank #2 (Buy).

ATMOS ENERGY CP (ATO): Free Stock Analysis Report

CHESAPEAKE ENGY (CHK): Free Stock Analysis Report

LACLEDE GRP INC (LG): Free Stock Analysis Report

SOUTHWEST GAS (SWX): Free Stock Analysis Report

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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: ATO , CHK , LG , SWX

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