On Sep 30, 2013, we have maintained our Neutral recommendation on utility holding company Northeast Utilities (NU). The company currently has a Zacks Rank #2 (Buy).
Why the Reiteration?
Northeast Utilities’ earnings per share in the previous quarter were 55 cents per share, beating the Zacks Consensus Estimate by 4 cents and the year-ago figure by 10 cents. The company reported revenues of $1,636 million, higher than the Zacks Consensus Estimate by $22 million and prior-year results by 0.4%. The increase in revenues was due to favorable performance from all the segments.
Northeast Utilities continues to enjoy the benefits from the NSTAR merger. In Apr, 2012, the company completed its merger with NSTAR. In the first half of 2013, the addition of NSTAR contributed $123.9 million to the company’s earnings. We believe that the merger will enable Northeast Utilities to increase its scale of operations and widen the customer base.
Northeast Utilities’ cash generation capacity, steady progress at several projects and the addition of new customers in the last couple of quarters will boost its performance, going forward.
Northeast Utilities’ performance primarily depends on its ability to manage transmission and distribution businesses. The company’s operations are sometimes subject to several risks such as breakdown and failure or damage of equipment and functions due to severe weather conditions and natural calamities. These incidents may disrupt the company’s operations while increasing operating costs.
Further, Northeast Utilities’ operations are subject to a number of legislative requirements, as well as environmental regulations, relating to emission of greenhouse gas and carbon dioxide, air and water quality, and waste management. Changes in environmental regulations are expected to impact the company’s cost of operations.
Other Stocks to Consider
Other stocks from the industry that are presently performing well include Brookfield Infrastructure Partners L.P. (BIP), Alliant Energy Corp. (LNT) and Entergy Corp. (ETR), each with a Zacks Rank #2 (Buy).