Back to top

Analyst Blog

We maintain a long-term Neutral rating on Questar Corporation (STR - Analyst Report) based on its strong earnings and dividend growth potential, partially offset by unstable natural gas fundamentals, the domestic imbalance of supply/demand and political headwinds in certain regions.

Questar delivered mixed results in the first quarter of 2011, with earnings of 39 cents falling short of both the Zacks Consensus Estimate and prior-year quarter's result. Total revenue ($470 million), however, comfortably moved ahead of our projection and the year-ago figure.

Management's confidence in Questar's business units is highlighted through the various development projects that are expected to drive high production and reserve growth rate in the years to come. With a focused and experienced managerial team, manageable debt maturities and long-term contracts, the company will likely sustain its profitability in the coming quarters.

We appreciate Questar's efforts to broaden its market exposure for liquefied natural gas (LNG - Snapshot Report) products and services. In this regard, the company has formed an alliance with Applied LNG Technologies LLC to jointly look for new market opportunities for LNG in the Rockies.

Despite all these positive aspects, Questar is unable to avoid the risks associated with the global economic volatility. The supply-demand imbalance, resulting from the flood of natural gas in the domestic market, will likely continue to weigh down the stock in the near to medium term.

With returns from Questar's regulated businesses (interstate natural gas transportation and storage and retail gas distribution) likely to suffer from disallowance of costs and lower usage, the company's growth prospects remain clouded.

Moreover, we believe that Questar will take some time to fully absorb the outcome of the spin-off. Until then, the business profile of the company is exposed to greater competitive risks from peers such as Anadarko Petroleum Corporation (APC - Analyst Report) and  Cabot Oil & Gas Corporation (COG - Analyst Report).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
MATRIX SERV… MTRX 30.69 +2.23%
SUPER MICRO… SMCI 25.09 +2.12%
QIHOO 360 T… QIHU 88.72 +1.90%
VIPSHOP HOL… VIPS 190.14 +1.59%
BBVA BANCO… BFR 14.05 +1.59%