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COPEL Reaches a New 52-Week High on 'Stable' Fitch Rating

Zacks Equity Research

Shares of Companhia Paranaense de Energia (ELP), or COPEL, scaled a new 52-week high of $17.65 during its trading session on Aug 27. The new apex represents a slight increase over the previous high of $17.48 reached on Jul 22, 2014.
COPEL closed the session at $17.63, reflecting a solid year-to-date return of 37.9%. The trading volume for the session was roughly 0.4 million American Depositary Receipts (:ADR). An expected earnings growth rate of 10.4% for the next five years, indicate further upward potential for this Brazilian electric utility.

Growth Drivers

Much of the price gain was driven by Fitch Rating maintaining its National long-term rating of ‘AA+(bra)’ on the stock. The rating, reflecting a stable outlook, has been awarded to COPEL for the 4th consecutive year on the back of its strong financial conditions, sound cash flow position and diversified business operations.

In first-half 2014, COPEL’s net income grew 27.8% over the year-ago comparable period with earnings coming in at $1.31 per ADR. Operating revenues rose 37.7% driven primarily by higher electricity sales to final consumers and distributors, as well as healthy construction and telecommunication revenues.

COPEL’s net cash generation from operating activities was $201.3 million, of which, approximately $130.6 million was used for capital spending. Dividend and interest on equity paid during the period totaled $109.1 million.

COPEL is also expanding its wind farm portfolio. In Jun 2014, the company received its board of directors’ approval for 49% stake acquisition in São Miguel do Gostoso wind farm complex. Exiting second quarter, the company had four operating and seven under construction wind farms, with a total installed capacity of 278 MW of electricity.    

The Zacks Consensus Estimate for COPEL is pegged at $1.98 for 2014 and $2.19 for 2015, reflecting year-over-year growth of 14.9% and 11% respectively. In addition, the company has an Earnings ESP of +14.14% for 2014 and +14.16% for 2015, indicating the extent by which the Most Accurate Estimate of $2.26 for 2014 and $2.50 for 2015 have surpassed their respective Zacks Consensus Estimates.

Other Stocks to Consider

With a market capitalization of $4.8 billion, COPEL presently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the electric utility industry include ALLETE, Inc. (ALE), Avista Corp. (AVA) and CMS Energy Corp. (CMS). All these stocks hold a Zacks Rank #2 (Buy).

Read the Full Research Report on ELP
Read the Full Research Report on CMS
Read the Full Research Report on AVA
Read the Full Research Report on ALE

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