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Public Service Enterprise (PEG) Gains Amid Market Volatility

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We issued an updated research report on Public Service Enterprise Group Inc. (PEG - Free Report) or PSEG on Mar 22. The company is striving to optimize generation margins by improving cost structure and performance as well as the reliability of its nuclear and fossil fuel-based facilities. Management believes that the recent improvement in the utility has neutralized challenges in PSEG Power subsidiary stemming from low electricity prices.

To meet capital investment goals successfully, the company announced plans to spend $15 billion on energy infrastructure. Of this, management expects to spend $12.3 billion for PSE&G’s baseline infrastructure program, which in turn reflects 7% CAGR growth in rate base.

Within its Public Service Electric and Gas Company (PSE&G) subsidiary, the company plans to spend $6 billion on transmission over the next five years, with the primary focus being on reliability and replacement of old infrastructure. Moreover, the company’s $1.3 billion of investment over the 2017-2019 time frame in four new combined cycle gas turbines under the Power segment will add approximately 1,838 MW of clean, reliable and efficient capacity to its fleet.

Public Service Enterprise’s stable liquidity and cash flows provide substantial financial flexibility and acts as a cushion in the present business environment. As of Dec 31, 2016, cash and cash equivalents were $390 million, compared with $198 million as of Dec 31, 2015. The company had available liquidity of around $3.5 billion under credit facilities as of Dec 31, 2016.

On the flip side, environmental issues, such as restrictions on carbon dioxide emissions and other pollutants produced by Public Service Enterprise’s fossil units, might increase compliance-related costs.

Further, the utility provider’s financial performance primarily depends on its ability to manage operations of transmission and distribution businesses. These operations face several operational risks including breakdown, failure or damage of equipments or processes, accidents and labor disputes.

Moreover, PSEG’s share price lost 2.2% in the last one year, compared to the Zacks categorized Utility-Electric Power industry's gain of 0.4%. This might have been triggered by the company’s participation in the wholesale energy market, which exposes it to commodity price volatility that is cyclical in nature.

Zacks Rank

Public Service Enterprise currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Fortis Inc. (FTS - Free Report) , Alliant Energy Corporation (LNT - Free Report) and Ameren Corporation (AEE - Free Report) .

Fortis earnings estimate for the current year remained unchanged at $1.92 in past 30 days. The company sports a Zacks Rank #1 (Strong Buy).

Alliant’s earnings estimate for the current year increased by a penny, to $2.00 in past 30 days. The company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ameren’s earnings estimate for the current year remained unchanged at $2.77 in past 30 days. The company carries a Zacks Rank #2.

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