We issued an updated research report on Entergy CorporationETR on Apr 13, 2015. The company's disciplined investments at its generation, transmission as well as distribution businesses are expected to boost its financials while at the same time strengthening reliability services for its customers. However, dependence on regulatory authorities for rate relief and price fluctuations in wholesale power markets could be a growth deterrent.
Entergy plans to invest $8 billion in the 2015 to 2017 time frame with the major share going to its generation business. In addition, the company has a strong project pipeline and has secured the Louisiana Public Service Commission approval to replace 100 miles of pipe over the next 10 years.
New Orleans, LA-based Entergy's nuclear fleet, along with its complementary and flexible fossil and hydro fleet, gives the company a distinct generation cost advantage over its fossil-fuel based competitors. Moreover, the company's installation of scrubbers and other emission-control equipments at its facilities will enable it to curb carbon emission, thereby meeting regulatory mandates.
This Zacks Rank #3 (Hold) company has also set forth a cost-saving initiative through its human capital management (HCM) program to be implemented by 2015 end. The benefits from this program are expected to be realized in 2016. Entergy's steady effort toward cost curtailment will help in improving margins.
However, Entergy's financial performance is guided by price fluctuations in wholesale power markets, which is a function of supply and demand. Also, the company depends upon rate relief at regular intervals at its different service areas. Any adverse decision in pending regulatory cases can materially impact Entergy's earnings.
Stocks to Consider
Better-ranked stocks in the electric utility space are MGE Energy Inc. MGEE , sporting a Zacks Rank #1 (Strong Buy) and DTE Energy Company DTE and Alliant Energy Corp. LNT , carrying a Zacks Rank #2 (Buy).