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Dominion Riding High on Growth Projects, Gas Supply a Woe
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On Aug 23, 2016, we issued an updated research report on Dominion Resources Inc. (D - Free Report) . Dominion’s expansion of electric transmission, natural gas facilities and midstream assets are strong positives. Its investments in green energy have also been commendable. However, the company’s dependence on third parties for natural gas supply and risks associated with the timely completion of major capital projects are some of the headwinds.
Dominion reported second-quarter 2016 operating earnings of 71 cents per share, in line with the Zacks Consensus Estimate but down 2.3% year over year. The decline was due to the impact of a milder weather, a planned refueling outage at Millstone, and share dilution. Moreover, total revenue of $2,598 million missed the Zacks Consensus Estimate by 5.1% and decreased 5.4% from the year-ago quarter.
Dominion has decided to invest nearly $15.7 billion in various growth projects during the 2016–2020 timeframe. Secure earnings from regulated assets will drive bottom-line growth at the company. Of this budget, the company has allocated $3.6 billion for the electric transmission business and $2.5 billion for the electric distribution business. Such systematic investments will help Dominion strengthen its existing infrastructure and enable it to provide uninterrupted service to customers.
Meanwhile, Dominion’s renewable projects for 2016 include two joint ventures in Utah with a capacity of 530 MW. The company has long-term power purchase agreements for these projects and they are expected to begin service in the third quarter. These solar projects are expected to add 4 cents to Dominion’s earnings in 2016. The company also received an approval from the Virginia State Corporation Commission for the construction of three solar facilities in the state. With a total capacity of 56 MW, these projects are scheduled to commence operations later this year.
On the flip side, Dominion’s gas unit depends heavily on third-party producers for the supply of natural gas. If a producer refuses or fails to deliver a specific quantity of natural gas or natural gas liquids (NGL), it would reduce the volume of natural gas and NGL available for the company’s pipelines and other assets.
Moreover, risks associated with the operation of nuclear facilities and unplanned outages at power stations in which Dominion has an ownership interest might derail management’s planned production goal and adversely impact its earnings.
Zacks Rank & Key Picks
Dominion currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the utility sector include CMS Energy (CMS - Free Report) , NiSource Inc. (NI - Free Report) and DTE Energy (DTE - Free Report) . Each of these stocks currently carries a Zacks Rank #2 (Buy).
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Dominion Riding High on Growth Projects, Gas Supply a Woe
On Aug 23, 2016, we issued an updated research report on Dominion Resources Inc. (D - Free Report) . Dominion’s expansion of electric transmission, natural gas facilities and midstream assets are strong positives. Its investments in green energy have also been commendable. However, the company’s dependence on third parties for natural gas supply and risks associated with the timely completion of major capital projects are some of the headwinds.
Dominion reported second-quarter 2016 operating earnings of 71 cents per share, in line with the Zacks Consensus Estimate but down 2.3% year over year. The decline was due to the impact of a milder weather, a planned refueling outage at Millstone, and share dilution. Moreover, total revenue of $2,598 million missed the Zacks Consensus Estimate by 5.1% and decreased 5.4% from the year-ago quarter.
Dominion has decided to invest nearly $15.7 billion in various growth projects during the 2016–2020 timeframe. Secure earnings from regulated assets will drive bottom-line growth at the company. Of this budget, the company has allocated $3.6 billion for the electric transmission business and $2.5 billion for the electric distribution business. Such systematic investments will help Dominion strengthen its existing infrastructure and enable it to provide uninterrupted service to customers.
Meanwhile, Dominion’s renewable projects for 2016 include two joint ventures in Utah with a capacity of 530 MW. The company has long-term power purchase agreements for these projects and they are expected to begin service in the third quarter. These solar projects are expected to add 4 cents to Dominion’s earnings in 2016. The company also received an approval from the Virginia State Corporation Commission for the construction of three solar facilities in the state. With a total capacity of 56 MW, these projects are scheduled to commence operations later this year.
DOMINION RES VA Price
DOMINION RES VA Price | DOMINION RES VA Quote
On the flip side, Dominion’s gas unit depends heavily on third-party producers for the supply of natural gas. If a producer refuses or fails to deliver a specific quantity of natural gas or natural gas liquids (NGL), it would reduce the volume of natural gas and NGL available for the company’s pipelines and other assets.
Moreover, risks associated with the operation of nuclear facilities and unplanned outages at power stations in which Dominion has an ownership interest might derail management’s planned production goal and adversely impact its earnings.
Zacks Rank & Key Picks
Dominion currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the utility sector include CMS Energy (CMS - Free Report) , NiSource Inc. (NI - Free Report) and DTE Energy (DTE - Free Report) . Each of these stocks currently carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>