On Jul 5, 2013, we upgraded our recommendation on Integrys Energy Inc. (TEG) to Outperform from Neutral based on high-quality acquisitions and investments in the lucrative compressed natural gas (“CNG”) market. The diversified energy holding company currently holds a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
The primary drivers include the company’s diligent efforts to promote its sales and marketing business. We believe Integrys Energy’s persistent focus on this segment will help counter competitive pressure.
The company is well positioned to witness favorable earnings yet again in the upcoming quarter following a solid first quarter performance, which beat our expectation.
The successful completion of the Fox Energy Center acquisition is expected to be another catalyst for Integrys Energy’s future growth. This endeavor will complement its long-term utility contract win from the Chicago government and help spur returns.
Of late, Integrys Energy has been branching out its operations to enhance its revenue stream. The company in a move to make the most of rising fuel demand, owing to increased truck activities, announced plans to add CNG fuel stations across 29 states in the U.S. Moreover, its emphasis on rate-based investments for the next three years will enable Integrys Energy to offer consistent high-quality services to its customer.
We believe these factors will allow the company to achieve its increased earnings goal of $3.25-$3.60 per share for 2013 from the prior range of $3.05-$3.55 per share.
The expected long-term earnings growth rate for Integrys Energy is set at 5%. The Zacks Consensus Estimate for 2013 represents projected year-over-year growth of 5.4% to $3.44 per share from $3.26 in 2012.
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