U.S. Markets closed

Chesapeake Utilities to Sell Natural Gas Marketing Business

Zacks Equity Research

Chesapeake Utilities Corporation CPK today declared that it is withdrawing from natural gas marketing business through the sale of majority of assets of Peninsula Energy Services Company, Inc. (“PESCO”) — its natural gas marketing subsidiary.

Till date, the company has made three separate transactions to sell PESCO's assets and contracts. PESCO's Florida retail operations will be sold to Gas South LLC. PESCO's other non-Florida retail operations and contracts were sold to United Energy Trading, LLC (UET). The subsidiary’s Mid-Atlantic wholesale contracts and Chesapeake Utilities' Delaware division, Maryland division and Sandpiper Energy Asset Management agreements were sold to NJR Energy Services Company (NJRES).

Reasons for the Sale

In the first half of 2019, revenues from PESCO fell 9.27% on a year-over-year basis from 2018 level of $130.4 Million. The company’s second-quarter earnings fell by 9 cents per share from the year-ago quarter’ level. The downside was caused by lower-than-expected contribution from PESCO.  

The operating income declined approximately $1.8 million for the three months ended Jun 30, 2019 from the year-ago period’s figure. The reduction was due to fall in PESCO's gross margin.

Long-Term Plans

As returns from PESCO are below expectations, the company has taken a decision to exit from the business and concentrate on its prospective core businesses.  

The company anticipates a gain from the sale of the assets in 2019 post the completion of the divestiture. Now, Chesapeake Utilities intends to focus on its core energy delivery businesses that will lower earnings volatility in the future and enable it to recover investments. The company has plans to invest $0.75 billion to $1 billion to strengthen operations during 2018-2022 time frame.

Price Performance

Shares of Chesapeake Utilities have returned 15.3% in the past 12 months compared with the industry’s growth of 11.2%.



 

Zacks Rank & Key Picks

Chesapeake Utilities currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other top-ranked stocks from the same space are MDU Resources Group, Inc MDU, Atmos Energy Corporation ATO and ONEOK, Inc OKE.

MDU Resources sports a Zacks Rank #1. The company pulled off an average positive earnings surprise of 1.64% in the last four quarters. The Zacks Consensus Estimate for the current year has inched up 0.67% in the past 90 days.

Atmos Energy has a Zacks Rank #2. The company delivered an average positive earnings surprise of 5.36% in the last four quarters. The Zacks Consensus Estimate for the current year has inched up 0.23% in the past 90 days.

ONEOK has a Zacks Rank #2. The company reported average positive earnings surprise of 4.58% in the last four quarters. The Zacks Consensus Estimate for the current year has moved up 1.3% in the past 90 days.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Atmos Energy Corporation (ATO) : Free Stock Analysis Report
 
MDU Resources Group, Inc. (MDU) : Free Stock Analysis Report
 
ONEOK, Inc. (OKE) : Free Stock Analysis Report
 
Chesapeake Utilities Corporation (CPK) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.