MetLife Partners with Pattern Energy

On Tuesday, insurance giant MetLife Inc. (MET - Analyst Report) entered into a partnership with San-Francisco based Pattern Energy Group LP for an equity investment in the latter’s Gulf Wind project located at Texas. However, the terms of the partnership investment remain undisclosed.

Pattern Energy Group is a fully integrated energy company that develops, constructs, owns and operates renewable energy and transmission assets in the United States, Canada and Latin America. Besides, with 118 wind turbines, the Gulf Wind project has the capacity to generate 283 megawatts of energy, which can annually provide power to about 80,000 homes in the region.

MetLife’s investment in the Pattern Energy Group’s wind farm on the Texas Gulf Coast will enable the latter to enhance its operating efficiencies through tax benefits earned from the wind energy project. Besides, collaborating with a leading brand such as MetLife will boost Pattern Energy Group’s financing capacity, particularly in the ongoing sluggish and volatile market conditions.

On the other hand, with more than a billion of investment in the company’s renewable energy projects, MetLife has also attempted to have its share of benefits from the rapidly developing energy markets. Given the ongoing struggle to make the global environment clean and carbon-free, the scope for renewable energy ventures has widened as it has a positive impact on the environment.

Estimate Trend Revision

Over the last 30 days, 4 of 16 analysts covering the stock have decreased their estimates for the third quarter of 2010, while one upward revision was witnessed. Currently, the Zacks Consensus Estimate for the third quarter is operating earnings of $1.05 per share, which would be up by 20.6% from the year-ago quarter.

The higher number of downward estimate revisions for the third quarter indicates a likelihood of negative trend in the performance of the stock in the near term.

With respect to earnings surprises, the stock has been steady over the last four quarters, with all four positive surprises. The average remained positive at 7.33%. This implies that MetLife has surpassed the Zacks Consensus Estimate by 7.33% over that period.

We believe that the solid earnings performance in the last quarter has injected further confidence in MetLife to invest in healthy projects that would generate modest-to-strong returns in the long run. Recently, MetLife also raised money from the market through stock offering, in order to meet its long-term growth targets. Besides, the pending ALICO acquisition is expected to close by the end of 2010 and will be immediately accretive to earnings, although related debt cost could mount pressure on the bottom line for some time. While we think MetLife should continue to benefit from its diversified business mix as well as its leading brand, risk of losses in the investment portfolio are likely to impact the results in the upcoming quarters.

Read the full analyst report on MET