By Christopher Edmonds Special to RealMoney.com 10/23/2002 11:54 AM EDT
INDIAN WELLS, Calif. -- With the annual Edison Electric Institute financial confab coming to a close, it's appropriate that this week's Bottom of the Barrel focus on the power companies in the portfolio.
Even as the power business has received a bad rap for the trading and marketing shenanigans of a handful of energy merchants, the smaller utilities in our portfolio have avoided most of the mess.....
Empire: Focus on Value Empire District Electric (EDE:NYSE - news - commentary - research - analysis) is a plain-vanilla utility based in Joplin, Mo. Nothing is terribly unique about Empire -- it generates power and distributes it to customers in the four-corners region of Missouri, Kansas, Oklahoma and Arkansas.
The company has some ancillary operations -- monitored security, fiber optic service, wireless Internet service, custom manufacturing, decorative lighting and water utility services to a handful of small Missouri communities -- but Empire's primary business is powering the homes and businesses of a region with about 150,000 residents.
Empire recently reported earnings for the September quarter that grew almost 50% year over year and edged out the consensus estimates. The improvement was the result of better weather, rate increases granted by regulators and a slight increase in power sales outside the company's service territory.
Ready to Power Up A failed merger and debt worries hit Empire's stock. There's nothing fancy about Empire, but its stock has felt pressure since I first profiled the company in January, largely because of the failed merger with merchant energy firm Aquila (ILA:NYSE - news - commentary - research - analysis) and a need to tweak its balance sheet to reduce debt. Empire addressed the leverage issue with an equity offering earlier this year, but because of concerns across the power sector, Standard & Poor's downgraded the company's debt to BBB from A-.
Now, however, might be a good time to take another look at Empire. The company posted a solid quarter, and it's on track to continue a strong performance at the core utility operation. Plus, Empire should get decent benefits from its noncore businesses.