WGL Holdings Inc.
) is a natural gas utility that has raised its annual payout 36
times in a row, even in the midst of a low gas price environment.
In addition, with strong customer growth and a focus on cost
control initiatives, this Zacks #2 Rank (Buy) is expected to head
towards the upper end of this year's earnings growth projection.
Impressive Fiscal Third Quarter
WGL Holdings reported fiscal third quarter (ended June 30) adjusted
earnings per share of 8 cents on August 3, outpacing the Zacks
Consensus Estimate at break-even and last year's earnings of 1
cent. The earnings growth was led by significant contributions from
its regulated business and its non-regulated segments (namely
Energy Marketing and Commercial Energy Systems).
The company's utility business narrowed its operating loss,
benefiting from new rates in Maryland and Virginia along with
customer growth. The Retail Energy-Marketing segment experienced a
robust gain from higher electric margin, driven by a growing market
share partially offset by lower natural gas margins.
Going forward, WGL Holdings expects adjusted earnings per share in
the range of $2.43 to $2.55 for fiscal 2012.
Consistent History of Growing Dividend
WGL Holdings pays an attractive annual dividend of $1.60 per share,
yielding a solid 3.95%. In March, it raised its dividend by 3.2%,
marking the 36th consecutive year with a dividend increase.
Moreover, WGL Holdings' current dividend caps the payout ratio at
around 64%, reflecting enough room for further dividend hikes owing
to strong management and solid finances.
Earnings Estimates Inch Higher
Four of 7 estimates for fiscal 2012 have moved higher in the past
30 days, pushing the Zacks Consensus Estimate up by 3 cents (or 1%)
to $2.51. For fiscal 2013, two out of 8 estimates moved north over
the same time frame, helping the Zacks Consensus Estimate advance
by 2 cents (or 1%) to $2.59.
With the fiscal 2011 profit level being $2.23 per share, the
projected growth rate stands at 12% for the current fiscal year.
The annual growth rate is expected to be 3% in fiscal 2013,
provided WGL Holdings meets the estimate.
With respect to its valuation metrics, shares of WGL Holdings look
attractive. The stock trades at about 16.2 times the forward
estimate, a slight discount to the industry average. Its price to
sales ratio of 0.8 is also below its peer group at 1.0 . The
company's trailing 12-month return on equity (ROE) of 10.5% is
similar to that of its peer group average.
Market Performance & Technicals
As the chart below shows, analysts are increasingly bullish on the
company, as is evident by their earnings estimates. In particular,
with the price and consensus chart demonstrating consistently
increasing consensus estimates for fiscal 2012 and 2013, shares are
expected to climb higher.
Headquartered in Washington, D.C., WGL Holdings is engaged in the
sale and delivery of natural gas, and serves energy-related
products and services. It owns and operates Washington Gas Light
Company and a group of energy-related, non-utility businesses that
focus on retail energy marketing and design-build energy services.
Washington Gas Light is a regulated natural gas distribution
company that serves customers in Washington, D.C., Maryland, and
WGL HLDGS INC (WGL): Free Stock Analysis Report
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