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Dominion (D) to Lower Debt level, Reaffirms 2018 Guidance
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Dominion Energy, Inc. (D - Free Report) announced that it has already taken steps to lower its present debt levels. The company decided to sell its non-core assets, issue equity and go ahead with its planned capital reduction to achieve targeted leverage ratio.
In February 2018, Dominion Energy borrowed $950 million under a 364-Day Term Loan Agreement that bears interest at a variable rate. In addition, the agreement contains a maximum allowed total debt to total capital ratio of 67.5%. So, the initiatives undertaken by the company will allow it to trim debt levels and meet its target.
At present, the total debt-to-capital ratio of the company stands at 74.18%, much higher than its industry average of 55.03%. The decision to lower debt levels amid rising interest rates is a well-timed one by management.
At 2017 end, Dominion Energy’s total interest expenses and other related charges were $1,205 million, up 19.3% from 2016 levels.
Reaffirms Guidance
Taking into consideration the initiatives to reduce its current debt levels, Dominion Energy reaffirmed its first quarter and full-year 2018 earnings per share guidance of 95 cents-$1.15 and $3.80-$4.25 per share, respectively. Dominion expects earnings to improve annually by 6-8% in the 2017-2020 time frame.
The company also reaffirmed its intention to increase its annual dividend rate by 10% through 2020, subject to the approval of its board of directors.
What’s in Store?
Dominion Energy expects the annual growth capital to be in the range of $3.7-$4.2 billion. Dominion Energy’s portfolio realignment strategy focusing on regulated assets and more than 90% of its earnings coming from regulated assets will drive Dominion’s earnings growth.
In addition to contribution from organic assets, its decision to merge with SCANA Corporation , contribution from acquired assets and new growth projects are likely to drive performance of the company.
Rate Hikes to Hurt Utilities
The Fed rate has now been raised for the sixth time since the first hike was announced in December 2015 when the U.S. economy had pulled itself out of the Great Recession. The policy makers sounded quite positive in their outlook for the U.S. economy. Quite naturally, the Fed expects to increase interest rates two more times in 2018.
The capital intensive Utility sector might cringe at the thought of it for it takes recourse to external sources of financing to meet its capital requirements. In a way, rising interest rates increase this sector’s cost of capital, leaving an adverse impact on margins. The rate hikes can also comprise Utilities’ ability to consistently pay out dividend.
Price Movement
In the last three months, decline in Dominion Energy’s shares was wider than the industry it belongs to.
Vistra Energy surpassed earnings estimates in three out of the last four quarters, resulting in an average positive surprise of 514.58%. Its 2018 earnings estimate moved up 27.1% to 89 cents per share in the last 60 days.
CenterPoint Energy surpassed earnings estimates in three out of the trailing four quarters, resulting in an average positive surprise of 11.56%. Its 2018 earnings estimate moved up 5.5% to $1.55 per share over the last 60 days.
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Dominion (D) to Lower Debt level, Reaffirms 2018 Guidance
Dominion Energy, Inc. (D - Free Report) announced that it has already taken steps to lower its present debt levels. The company decided to sell its non-core assets, issue equity and go ahead with its planned capital reduction to achieve targeted leverage ratio.
In February 2018, Dominion Energy borrowed $950 million under a 364-Day Term Loan Agreement that bears interest at a variable rate. In addition, the agreement contains a maximum allowed total debt to total capital ratio of 67.5%. So, the initiatives undertaken by the company will allow it to trim debt levels and meet its target.
At present, the total debt-to-capital ratio of the company stands at 74.18%, much higher than its industry average of 55.03%. The decision to lower debt levels amid rising interest rates is a well-timed one by management.
At 2017 end, Dominion Energy’s total interest expenses and other related charges were $1,205 million, up 19.3% from 2016 levels.
Reaffirms Guidance
Taking into consideration the initiatives to reduce its current debt levels, Dominion Energy reaffirmed its first quarter and full-year 2018 earnings per share guidance of 95 cents-$1.15 and $3.80-$4.25 per share, respectively. Dominion expects earnings to improve annually by 6-8% in the 2017-2020 time frame.
The company also reaffirmed its intention to increase its annual dividend rate by 10% through 2020, subject to the approval of its board of directors.
What’s in Store?
Dominion Energy expects the annual growth capital to be in the range of $3.7-$4.2 billion. Dominion Energy’s portfolio realignment strategy focusing on regulated assets and more than 90% of its earnings coming from regulated assets will drive Dominion’s earnings growth.
In addition to contribution from organic assets, its decision to merge with SCANA Corporation , contribution from acquired assets and new growth projects are likely to drive performance of the company.
Rate Hikes to Hurt Utilities
The Fed rate has now been raised for the sixth time since the first hike was announced in December 2015 when the U.S. economy had pulled itself out of the Great Recession. The policy makers sounded quite positive in their outlook for the U.S. economy. Quite naturally, the Fed expects to increase interest rates two more times in 2018.
The capital intensive Utility sector might cringe at the thought of it for it takes recourse to external sources of financing to meet its capital requirements. In a way, rising interest rates increase this sector’s cost of capital, leaving an adverse impact on margins. The rate hikes can also comprise Utilities’ ability to consistently pay out dividend.
Price Movement
In the last three months, decline in Dominion Energy’s shares was wider than the industry it belongs to.
Zacks Rank
Dominion has a Zacks Rank #3 (Hold). Some better-ranked stocks from the same industry are Vistra Energy Corp. (VST - Free Report) and CenterPoint Energy, Inc. (CNP - Free Report) , both carrying a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Vistra Energy surpassed earnings estimates in three out of the last four quarters, resulting in an average positive surprise of 514.58%. Its 2018 earnings estimate moved up 27.1% to 89 cents per share in the last 60 days.
CenterPoint Energy surpassed earnings estimates in three out of the trailing four quarters, resulting in an average positive surprise of 11.56%. Its 2018 earnings estimate moved up 5.5% to $1.55 per share over the last 60 days.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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