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Analyst Blog

We reiterate our Neutral recommendation on Xcel Energy Inc. (XEL - Analyst Report). The Minneapolis-based electricity and natural gas company at present carries a Zacks Rank #2 (Buy).

Why the Reiteration?

We believe the company’s successful cost-containment efforts and favorable outcomes of the NSP Minnesota and NSP Wisconsin rate cases will act as tailwinds in the upcoming quarters.

Xcel Energy is expected to derive substantial benefits from its ambitious CapX2020 transmission program in Minnesota, which received regulatory approval. The Bemidji-Grand Rapids Transmission line, a part of CapX2020 was completed and the 230-Kv (Kilovolt) line has already come into service.

The company is also striving to develop its renewable business. As of now it has added 1,713 megawatt of wind energy in Colorado. This will certainly complement Xcel Energy’s future growth. The onset of production tax credits is expected to act as a major catalyst to the company’s eco-friendly endeavors.

Moreover, a sound financial position and maintenance of a favorable credit rating are other positives that could work in favor of Xcel Energy.

The Zacks Consensus Estimate for the first quarter 2013 is set at 41 cents per share, up an estimated 6.73% from year-ago earnings of 38 cents per share.

Other Stocks to Consider

While we believe Xcel Energy will perform satisfactorily in the coming quarters, other utility companies worth a look are Brookfield Infrastructures Partners (BIP - Snapshot Report), Pike Electric Corp (PIKE - Snapshot Report) and Empresa Nacional Electricidad SA (EOC - Snapshot Report). All the above currently carry a Zacks Rank #1 (Strong Buy).

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