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On Sep 26, Zacks Investment Research upgraded UNS Energy Corporation to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

UNS Energy has witnessed rising earnings estimates on the back of a solid performance in the second quarter. The electric utility has delivered positive earnings surprises in the last 4 quarters with an average beat of 34.22%. The long-term earnings growth of the company is presently pegged at 6.95% driven by sales growth of 1.53%.

The second quarter marked the end of four and half years of rate freeze at its subsidiary Tucson Electric Power (TEP). During this period, UNS Energy controlled its operating costs efficiently and also ensured the safety and reliability of its services.

The Arizona Corporation Commission (ACC) approved new rates for TEP in June, which came into effect from Jul 1. We believe the new rates will create additional funds for the company, which could be recycled back to develop its infrastructure.

The financial flexibility and strong performance have enabled the company to increase the annual dividend rate in each of the last 12 years. The current dividend yield of the company is 3.69%, higher than the industry average of 2.01%.

The Zacks Consensus Estimate for 2013 increased 5.7% in the last 60 days to $2.86 per share, which reflects year-over-year growth of 28.03%. For 2014, the Zacks Consensus Estimate increased 1.2% in the last 60 days to $3.45 per share, which reflects year-over-year growth of 20.96%.

Other Stocks to Consider

Besides UNS Energy Corp., a few other electric utilities are also performing well and have a favorable Zacks Rank. These are The AES Corporation (AES - Analyst Report), Brookfield Infrastructure Partners L.P. (BIP - Snapshot Report) and Integrys Energy Group, Inc. (TEG - Analyst Report), each with a Zacks Ranks #2 (Buy).

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