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Integrys Upgraded to Outperform

by Zacks Equity Research

January 21, 2013 | Comments : 0 Recommended this article: (0)

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On Jan 17 2013, we upgraded our recommendation to Outperform from Neutral on Integrys Energy Group Inc. ( TEG - Analyst Report ) . Currently, the company retains a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

The company recently clinched a big-time non-coal based power supply contract from the Chicago government. The deal is expected to add yearly revenue of $300 million till 2015. In addition, the acquisition of Fox Energy, a natural gas fired facility, will complement the aforementioned deal. It will allow the company to utilize 593 megawatt of output from the combined cycle generation facility placed in Kaukauna.

On the heels of the contract win, the Zacks Consensus Estimate for the first quarter of 2013 witnessed a sharp rise of 5.81% to $1.64 per share.

The company maintained a fairly consistent dividend level of 68 cents per share. Also, Integrys Energy’s present dividend yield of 5.09% is at par with the industry yield, which is expected to retain investor confidence in the stock.

The company’s earnings of 55 cents per share for the third quarter 2012 comfortably beat our estimate of 38 cents per share. Earnings surprises generally drive positive estimate revisions.

Moreover, the company’s capital outlay of $2,704 million for the period 2012 to 2014 will enable it to effectively carry out high-growth transmission projects like the East and West Side Expansion projects and the Main Replacement Activity program in Chicago.

The successful divestments of the Westwood, Beaver Falls and Syracuse assets will further boost the company’s capital liquidity position and will support future acquisition goals.

Other Stocks to Consider

Apart from Integrys Energy, other companies in the utility domain who are performing well and currently maintains Zacks Rank #1 (Strong Buy) are Huaneng Power International Inc. ( HNP - Snapshot Report ) , Pike Electric Corporation ( PIKE - Snapshot Report ) and Wisconsin Energy Corporation ( WEC - Analyst Report ) .

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