We issued an updated research report on natural gas-focused energy company Questar Corp. STR on May 27, 2015.
The company has reported weaker-than-expected first-quarter 2015 results. However, we believe that it will perform well in the near term, given its focused and experienced managerial team, manageable debt maturities and long-term contracts.
Questar currently carries a Zacks Rank #3 (Hold). This implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.
On Apr 29, Questar reported first-quarter earnings of 48 cents per share that failed to meet the Zacks Consensus Estimate by a penny. However, results were flat year over year. Continued growth in customer base and favorable results from the 2014 Utah rate case at its Questar Gas segment were marred by low transportation volumes and weak pricing.
Questar’s extensive natural gas exposure raises its sensitivity to the commodity’s price, which continues to be volatile. Questar Pipeline and Wexpro segments of the company continue to be under pressure owing to weak commodity prices. This restricts the company’s near-term growth outlook.
However, the company has maintained 2015 earnings guidance in the range of $1.20–$1.30 per share amid expectations of strong customer growth in the Questar Gas segment. This should help it to achieve targets. Also, we believe that the company’s planned investment strategy will enable it to accomplish long-term earnings growth of 4–6% despite low natural gas and liquids prices.
Additionally, Questar’s long and consistent dividend paying record reflects its strong financial position.
Stocks to Consider
Better-ranked players from the utilities sector include Chesapeake Utilities Corporation CPK, AGL Resources Inc. GAS and Sempra Energy SRE. While Chesapeake sports a Zacks Rank #1 (Strong Buy), both AGL Resources and Sempra Energy hold a Zacks Rank #2 (Buy).
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