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On Aug 24, Zacks Investment Research upgraded natural gas-focused energy company, Questar Corp. (STR - Analyst Report) to a Zacks Rank #2 (Buy).

Why the Upgrade?

After the QEP Resources Inc. (QEP - Analyst Report) spin-off, Questar transformed itself into a natural gas-focused energy company, which explores natural gas resources and serves customers domestically and worldwide. It has three principal subsidiaries – Wexpro Company, Questar Pipeline and Questar Gas Company.

On Jul 31, the Utah-based firm reported second quarter earnings of 22 cents – in line with the Zacks Consensus Estimate – on the back of improvements in its ‘Questar Gas’ and ‘Wexpro’ segments, which were offset by weak ‘Questar Pipeline’ results. Total revenue of $195.6 million was up 3.8% from the year-ago level.

Last month, Questar subsidiary, Wexpro, announced the acquisition of additional working interest in natural gas producing properties for a consideration of $106.4 million. The acquisition is expected to add value to the company’s assets and enhance its portfolio.

The company’s dividend story also looks promising. Last quarter, it paid a dividend of 18 cents, reflecting a 6% hike. This marked the company’s 41st dividend increase in as many years. Questar has also announced a dividend of 18 cents for the next quarter as well, making it the company’s 275th consecutive dividend payment.

Moreover, the company displays industry leading return on equity (ROE) figures and has one of the best credit ratings in the utility sector, thus enjoying a competitive edge over its peers.

All these positives are reflected in the company’s long-term expected earnings growth rate of 5.07%. The Zacks Consensus Estimate for the third quarter as well as for 2013 has moved up by a penny to 18 cents and $1.19, respectively over the last 60 days.

Other Stocks to Consider

In addition to Questar, there are certain other firms in the energy sector that are expected to perform even better over the next one to three months. These include Magellan Midstream Partners LP (MMP - Analyst Report) and Dril-Quip, Inc. (DRQ - Analyst Report) – both holding a Zacks Rank #1 (Strong Buy).


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