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CenterPoint Energy to Gain From Infrastructure Upgrades

We recently issued an updated research report on CenterPoint Energy, Inc. CNP. The company delivered third-quarter 2018 adjusted earnings of 39 cents per share, lagging the Zacks Consensus Estimate of 41 cents by 4.9%. However, the bottom line improved by a penny from the year-ago quarter.

CenterPoint Energy’s current capital outlay of $8.2 billion for the next five years includes an investment of $1.7 billion in 2018. This reflects a 17% rise in the company’s investment plan from the last year’s projection.

What’s Driving the Stock?

CenterPoint Energy expects infrastructural upgrades, asset replacement and industrial load growth to drive earnings. The company is currently focused on upgrading infrastructure and improving reliability. On account of the increased capital expenditure plan, the company now targets 5-7% annual EPS growth through 2019 and 2020.

On the regulatory front, the company’s transmission investment recovery filing for an annual increase of $41 million became effective July 2018. CenterPoint Energy’s most recent distribution investment recovery filing became effective September that provided an annual increase of $31 million. Such positive filing outcomes are expected to boost the company’s growth trajectory.

CenterPoint Energy also maintains a stable liquidity position, backed by strong cash generation capacity. As of Sep 30, 2018, it had cash and cash equivalents of $293 million compared with $260 million at 2017 end.

However, performance of the company’s regulated electricity and natural gas utilities depends on rate relief at regular intervals within its different service areas. Any adverse decision in pending regulatory cases can substantially impact the company’s earnings.

Estimates for CenterPoint Energy have been revised downward over the past 30 days. Irrespective of that, the company’s bottom line surpassed the consensus mark twice in the trailing four quarters, with average of 5.91%.

CenterPoint Energy, Inc. Price and Consensus

CenterPoint Energy, Inc. Price and Consensus | CenterPoint Energy, Inc. Quote

Zacks Rank and Key Picks

CenterPoint Energy currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the same space are Ameren Corporation AEE, CMS Energy Corporation CMS and Entergy Corporation ETR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ameren delivered average positive earnings surprise of 15.40% in the last four quarters. The Zacks Consensus Estimate for current-year earnings has been revised 5% upward to $3.37 over the past 90 days.

Entergy Corporation pulled off average earnings surprise of 36.20% over the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings has been raised 11.3% to $6.98 over the past 90 days.

CMS Corporation came up with average beat of 6.37% in the preceding four quarters. The Zacks Consensus Estimate for the current-year bottom line has remained unchanged over the past 90 days.

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