On Dec 30, we have issued an updated research report on CenterPoint Energy, Inc. (CNP). Systematic investments in organic growth projects along with a stable financial position are expected to boost the company’s future performance. In addition, several factors have triggered a steady rise in customer count. However, uncertain outcomes of impending rate cases, several operational risks and dependence on retail electric providers for rate payments will likely offset these positives.
This Zacks Rank #4 (Sell) stock’s third-quarter 2014 earnings and revenues surpassed the Zacks Consensus Estimate primarily on the heels of an increased number of customers. The bottom line however registered a year-over-year decline mainly due to higher operation and maintenance expenses.
CenterPoint Energy invests substantially in enhancing its utility transmission and distribution infrastructure. The company also focuses on replacing aging infrastructure and implementing modern technologies at its utilities. These initiatives will enable the company to provide reliable services to its customers, going forward.
A stable financial position, including an available liquidity of around $2.03 billion under total bank facilities and cash balance of $0.23 billion as of Sep 30, 2014, supports CenterPoint Energy’s capital investment program.
CenterPoint Energy’s customer count has increased over the last several quarters, primarily on the heels of an ongoing recovery in the economy of Houston. Going forward, this factor will likely drive the company’s growth.
On the flip side, rate relief plays an important role in CenterPoint Energy’s performance as it owns regulated electricity and natural gas utilities. Any unfavorable judgment in pending regulatory cases might impact the company’s financials adversely.
Moreover, CenterPoint Energy’s operations in the U.S. gulf coast remains a major cause of concern as this area is exposed to devastating hurricane activities. Despite having general liability and property insurance, the company’s financial performance might be affected as insurance may not cover all expenses of reconstructing damaged infrastructure.
Key Picks from the Sector
Some better-ranked stocks in the sector include Black Hills Corporation (BKH), PPL Corporation (PPL) and PG&E Corporation (PCG). Black Hills carries a Zacks Rank #1 (Strong Buy) while PPL Corporation and PG&E Corporation hold a Zacks Rank #2 (Buy).
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