Back to top

Analyst Blog

Natural gas-focused energy company Questar Corporation (STR - Analyst Report) reported weak first-quarter 2013 earnings.

Earnings per share came in at 41 cents, down 2.4% from the profit of 42 cents earned in the prior-year quarter, mainly due to higher depreciation and administrative expenses. The result also missed the Zacks Consensus Estimate by 2 cents.

Total revenue was $476.9 million, beating the Zacks Consensus Estimate of $470.0 million. Revenues also increased 12.0% from the year-ago level of $425.7 million due to increase in demand for natural gas as well as strong performances by Questar Gas and Wexpro segments.   

Segment Analysis

Questar Gas: The segment generated $418.3 million in revenues, up 14.3% from the prior year. This increase was favored by the growing demand for natural gas due to a dip in the temperature. The segment registered an income of $64.3 million, against an income of $61.8 million in the first quarter of 2012.

As of Mar 31, 2013, Questar Gas served 937,400 customers, representing a hike of 14,128 or 1.5% year over year as compared to a 1.0% hike in the previous year.

Wexpro: Consolidated sales increased 12.0% year over year to $10.3 million in the quarter. Segmental income from continuing operations also increased to $39.8 million from $37.2 million in the prior-year quarter, attributable to a higher average investment base.

Quarterly production of natural gas edged up 2.7% to 15.4 billion cubic feet (Bcf), up from 15.0 Bcf in the first quarter of 2012.

Questar Pipeline: Consolidated revenues of $48.3 million decreased by 4.4% from the $50.5 million in the comparable quarter last year. Income from continuing operations was $30.2 million, reflecting a drop of 5.0% year over year. The quarter’s performance was impacted by lesser revenues in natural gas liquids along with a rise in depreciation and amortization expenses.

The total natural gas transportation volumes in the quarter was $233.7 million decatherms, up from the prior-year level of 227.2 million decatherms.

Expenses

The general and administrative expenses for this quarter have increased by 16.2% to $33.8 million as compared to the year-ago period.

The depreciation, depletion and amortization expenses increased by 9.8% to $48.5 million in this quarter as compared to first-quarter 2012.  

Financials

As of Mar 31, 2013, Questar had long-term debt (including current portion) of $1,140.4 million, with a debt-to-capitalization ratio of 51.3%.

Guidance

For 2013, Questar has sustained its previous guidance for earnings in the range of $1.12 to $1.20 per share. Questar expects that the approval of Wexpro II by the regulators of Utah and the three agreements signed by Questar Fueling – an affiliate of Questar – for the production of compressed natural gas (CNG) will generate significant cash flows for its shareholders in the future.

Questar estimated that its total investment of capital will be roughly $450 million in 2013.  

Stocks to Consider

Questar currently carries a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at other energy firms like EPL Oil & Gas Inc. , Tesco Corporation (TESO - Snapshot Report) and SemGroup Corporation (SEMG - Snapshot Report) as attractive investments. All these firms – sport a Zacks Rank #1 (Strong Buy).

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
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%