On May 23, we issued an updated research report on Public Service Enterprise Group Incorporated (PEG - Free Report) , also known as PSEG.Asolid portfolio of regulated and non-regulated utility assets provides stable earnings and significant long-term growth potential.
Public Service Enterprise reported first-quarter 2018 adjusted operating earnings of 97 cents per share, which missed the Zacks Consensus Estimate by a penny. Revenues were $2,818 million in the quarter, which surpassed the Zacks Consensus Estimate of $2,740 million by 2.8%. Higher electric sales volumes drove the company’s top line.
However, stringent environmental regulations and fluctuations in commodity prices are growth deterrents.
In a year’s time, the stock has gained 18.5% against the industry’s decline of 5.7%.
What’s Driving Public Service Enterprise?
Public Service Enterprise strives to optimize generation margins by improving cost structure and performance. Low-cost nuclear fleet and expanding generating capacity from renewable sources is expected to drive earnings. Moreover, consistent improvement in energy markets in response to the low-priced gas environment should help PSEG Power — the company’s subsidiary — to increase efficiency and performance of plants and lower costs.
The company’s current capital investment plan is to spend in the range of $13-$15 billion on its energy infrastructure during 2018-2020. Of this, the company expects to spend $11.5-$13.2 billion for its baseline infrastructure program, at a CAGR 7-9% in rate base over the next three years.
PSE&G consistently upgrades gas distribution system as part of its Gas System Modernization Program (“GSMP”), which aims to replace approximately 510 miles of cast iron and unprotected steel gas mains along with 38,000 unprotected steel service lines to homes and businesses.. In April 2018, the company settled with the BPU for a GSMP II program, an extension of its GSMP, through which it aims to invest $1.9 billion over a five-year period beginning in 2019.
PSEG Power is constructing and operating five new combined-cycle gas plants — a 755-MW facility at the Keys Energy Center in Maryland; a 540-MW facility on its existing Sewaren station in New Jersey. These projects, when completed will further lower carbon footprints of the company.
However,participation in the wholesale energy market exposes Public Service Enterprise to commodity price volatility, which is cyclical in nature.Stringent environmental regulations,risks including breakdown, failure or damage of equipment’s or processes of transmission and distribution may dent growth.
Zacks Rank & Key Pickups
Public Service Enterprise has a Zacks Rank #3 (Hold).
A few-better ranked stocks in the same space are NRG Energy, Inc (NRG - Free Report) , IDACORP, Inc (IDA - Free Report) and Allete, Inc (ALE - Free Report) . NRG Energy sports a Zacks Rank # 1 (Strong Buy). IDACORP and Allete carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NRG Energy pulled off average positive earnings of 507.93% in the last four quarters. The Zacks Consensus Estimate for 2018 EPS moved up 10.4% in the last 60 days.
IDACORPdelivered average positive earnings of 4.98% in the last four quarters. The Zacks Consensus Estimate for 2018 EPS moved up by a penny in the last 60 days.
ALLETE pulled off average positive earnings of 4.62% in the last four quarters. The Zacks Consensus Estimate for 2018 EPS moved up 0.6% in the last 60 days.
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