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Analyst Blog

On Aug 7, 2014, we issued an updated report on SCANA Corp. (SCG - Analyst Report). This Zacks Rank #2 (Buy) stock reported positive earnings surprises in the trailing 4 quarters with an average beat of 7.09%.

The company reported strong financial results for the second quarter of 2014 with both the top and the bottom line beating the Zacks Consensus Estimate. The upside came from weather-related electricity sales, along with customer growth and rate base hikes.

SCANA’s nuclear expansion project is a catalyst for future earnings growth. Given SCANA’s financing plan, construction budget and schedule, we expect it to fund its nuclear expansion project. Management projects 2014 earnings in the range of $3.45–$3.65 per share and expects to achieve the target based on industrial expansion and continued customer growth. As the company's capital expenditure escalates with new nuclear projects and its investments are recognized in the rate base, the regulated earnings power is expected to improve.

SCANA is well positioned in a positive regulatory environment, and has a low-risk business with outstanding customer growth and operational efficiency. These in turn are favorable for stable cash flow generation and growth. Another positive for shareholders is SCANA’s utility business mix. Most of the company’s total earnings come from the regulated electricity and natural gas utilities business.

Columbia, SC-based SCANA’s operations include generation, transmission, distribution and sale of electricity to retail and wholesale customers within the state. The company also purchases, sells and transports natural gas to retail customers; provides energy-related risk management services; and acquires, owns and provides financing for nuclear fuel, fossil fuel and emission allowances.

Other Stocks to Consider

Other stocks worth considering in the energy sector include Sunoco Logistics Partners L.P. (SXL - Analyst Report), CNOOC Ltd. (CEO - Analyst Report) and Western Gas Equity Partners, LP (WGP - Snapshot Report). All these stocks sport a Zacks Rank #1 (Strong Buy).

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