On March 24, 2014, the shares of Great Plains Energy Incorporated (GXP) hit a 52-week high of $27.02, finally closing the day a trifle lower at $26.58. The company registered positive earnings surprises in the last four quarters, with an average beat of 23.01%.
Great Plains Energy is set to benefit from the gradual improvement in the economies of its service territories. The company sells electricity to residential, commercial and industrial customers in the states of Missouri and Kansas besides providing steam services in Missouri. Reinvigorated business activities and lower levels of unemployment in its service territories will boost the demand for the company’s services.
In addition, the company’s initiative to reduce the regulatory lag and focus on increasing usage of renewable energy to generate electricity is going to have a positive impact on its performance.
Riding on these positives, Great Plains Energy expects to deliver earnings per share in the range of $1.60 to $1.75 in 2014. The company is also targeting earnings growth in the range of 4% to 6% through 2016 from 2014 targeted levels.
The Zacks Consensus Estimate for 2014 is presently at $1.66 per share, near the midpoint of the company’s expectation, reflecting year-over-year growth of 2.28%. The 2014 consensus estimate moved up marginally by 0.6% in the last 30 days as 3 out of 10 estimates moved north. We expect long-term earnings growth of 5.15%.
Great Plains Energy is committed to increasing shareholder wealth by regular dividend payments. The company aims to increase the dividend in the range of 4% to 6% in the near term. Rate-based growth and investments in infrastructure will ensure a stable performance from the company going forward and guarantee incremental dividend payouts. In fact, one of the very attractiveness of utility companies is their ability to pay regular dividends to shareholders.
Great Plains Energy currently carries a Zacks Rank #2 (Buy). Other companies in the industry which are worth considering include Exelon Corporation (EXC), Otter Tail Corporation (OTTR) and Public Service Enterprise Group Inc. (PEG). All the above stocks presently have a Zacks Rank #1 (Strong Buy).
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