We reiterate our Neutral recommendation on
Xcel Energy Inc.
). The Minnesota-based utility posted mixed financial results in
the third quarter 2012 with earnings beating the Zacks Consensus
Estimate while the revenue lagging it.
We believe the company's $13.2 billion capex outlook for the
timeframe 2013 to 2017 will help in executing its infrastructure
upgrade program and also boost its pipeline and electric
business. Xcel Energy's CapX2020 program is advancing well and is
expected to contribute to near-term profitability.
However, expenses related to the incremental property tax will
continue to impact the company's bottom-line results in the
upcoming quarters. Moreover, regulatory pressure and seasonal
demand volatilities could limit growth at Xcel Energy.
Favorable rate changes in Xcel Energy's New Mexico and Texas
units will benefit the top-line results, going forward. The
company's successful cost-containment efforts are also an
Given the ongoing development initiatives at Xcel Energy, the
stock retains a short-term Zacks #2 Rank (Buy rating).
Another operator in the utility space
American Electric Power Company Inc.
) holds a Zacks #3 Rank (Hold rating) in the short term. It is
heavily investing in growth-acceleration projects like the
108-mile Prairie transmission program connecting east and west
Kansas as well as the electric generation Turk Plant in Arkansas
which will come online before the end of 2012. However,
uncertainty regarding approval to operate its Ohio generating
assets could limit growth.
Xcel Energy reaffirmed its earnings guidance for 2012 in the
range of $1.75-$1.85 per share. The Zacks Consensus Estimates for
the fourth quarter and full year 2012 are currently pegged at 28
cents and $1.80 per share, respectively.
Xcel Energy is an electricity and natural gas company, with
operations in eight Western and Midwestern states. With a market
capitalization of $13.04 billion, the company has 11,312 full
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