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Earnings momentum for PNM Resources Inc. (PNM - Snapshot Report) is on the rise thanks to new retail rates and favorable weather in its service territories. This diversified utility registered an earnings surprise of 6.5% in the second quarter 2012 and has beaten the Zacks Consensus Estimate in 9 of the last 12 quarters. This Zacks #2 Rank (Buy) stock also offers a healthy dividend yield of 2.8%.

Strong Quarter

On August 3, PNM Resources reported second quarter earnings of 33 cents, surpassing the year-ago figure by 12 cents and the Zacks Consensus Estimate by 2 cents. Results benefited from warm weather in New Mexico and new retail rates introduced last August.

Despite a 22% decline in total revenue, a brisk decline in costs helped expand margins. Operating income nearly doubled year over year to $65.1 million.

PNM Resources expects its earnings per share for 2012 to remain in the middle of the range of $1.20 to $1.32.

Estimates Inch Higher

For 2012, one of eight estimates was revised upward in the last 30 days. As a result, the Zacks Consensus Estimate moved higher by a penny to $1.27 per share. This reflects an estimated year-over-year growth of 17.9%.

Stable Dividend

PNM Resources has been consistently paying dividends to its shareholders. The company raised its quarterly dividend rate to 14.5 cents in March 2012 from the prior payout of 12.5 cents. The current annualized rate of 58 cents reflects a dividend yield of 2.8%.

Reasonable Valuation

Shares of PNM Resources Inc. are roughly trading 16.2 times the full year 2012 estimate with the PEG ratio at 1.74 times. The price-to-book is at 0.98x, a 17.6% discount to the peer group average of 1.19x. The price-to-sales is at 1.08x, a 4.4% discount to the peer group average of 1.13x.

The company has a trailing 12-month ROE of 6.9% compared with the peer group average of 7.4%.

Following the earnings release, shares of PNM Resources have fared relatively better than the simple moving averages for 200 days of $18.78 and 50 days of $20.14.

Based in Albuquerque, New Mexico, PNM Resources, Inc. was founded in 1917. The company’s generation portfolio includes coal, nuclear, natural gas, solar and wind energy based units with a generation capacity of 2,550 megawatts. The market capital of this company is $1.64 billion and it has 1,951 employees. The company competes with El Paso Electric Co. (EE).

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