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Integrys reported dull top and bottom line numbers in the first quarter of 2012. The company reported adjusted earnings of $1.55 per share compared with $1.57 per share in the year ago quarter. The underperformance was due to mild weather patterns affecting electric margins. Cognizant of these factors, we reiterate our Neutral recommendation on Integrys Energy Group Inc. (TEG - Analyst Report).

Integrys’ recent strategy to refocus on its traditional utility operations and strong customer retention rate is expected to propel its income portfolio in the long run. Besides, we anticipate that its retail electric operation will provide an added impetus to growth.

However, Integrys’ future operations might be slowed down by federal regulatory restrictions on rates and inadequate availability of capital resources. Unexpected disasters whether natural or infrastructural and failure to upgrade existing facilities could also constrain the company’s development. Although having a solid investment foundation, the company is exposed to macroeconomic volatilities which impacts energy prices limiting company’s future growth potential.

On a more positive note, Integrys’ continuous optimization of its asset portfolio mix is anticipated to provide increased returns to its shareholders and also aid in propelling its stock position. Moreover, its strong financial outlook and healthy dividend will further help in keeping its growth momentum.

Integrys expects pro forma earnings in 2012 in the band of $3.35 – $3.55 per share. The company estimates GAAP earnings in 2012 in the range of $3.38 – $3.58 per share. The Zacks Consensus Estimates for the second quarter and 2012 are currently pegged at 38 cents per share and $3.43 per share, respectively.

Integrys presently retains a Zacks #3 Rank which translates into a short-term Hold rating. The company’s peers include Wisconsin Energy Corporation (WEC - Analyst Report) and Alliant Energy Corporation (LNT - Snapshot Report).

Based in Illinois Chicago, Integrys Energy Group engages in natural gas and electric utility operations, and non-regulated energy operations in the United States and Canada. It generates and supplies electricity from coal, natural gas, fuel oil, hydroelectric, nuclear, and wind resources to residential, commercial and industrial, wholesale consumers.

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