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Here's Why You Should Add Pampa Energia to Your Portfolio

Zacks Equity Research
·3 mins read

Pampa Energia S.A. PAM is benefiting from its focus on delivering a safe, clean and reliable energy source to customers. Also, the utility’s strong fundamentals remain a tailwind.

Let’s focus on the factors that make this currently Zacks Rank #2 (Buy) stock a strong investment pick. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Northbound Estimate Revision

The Zacks Consensus Estimate for 2020 and 2021 earnings has moved 45.4% and 7% north, respectively, in the past 60 days.

Stellar Surprise History & Long-Term Earnings Growth

Pampa Energia’s trailing four-quarter earnings surprise is 153.99%, on average.

Its long-term (three to five years) earnings growth rate is currently projected at 6.46%.

Capital Plans Bode Well

The company has direct and indirect interests in Transportadora de Gas del Sur S.A. (TGS), Argentina’s major gas transportation company. Pampa Energia’s five-year investment plan to be executed by TGS is already approved. The company requires significant investments in the operation and maintenance of its pipeline system to provide a quality-driven, safe and reliable service. The plan valued at $6,786 million, commenced on Apr 1, 2017 and will be on track through Mar 31, 2022.

Strong Financial Position

Pampa Energia’s long-term debt-to-capital is 39.86% compared with the industry’s average of 49.71%. Its times interest earned (TIE) ratio declined to 1.85 at the end of second-quarter 2020. However, a greater-than-one TIE ratio reflects the company’s ability to meet its debt obligations in the near future without any difficulty.

Stock Surpasses Industry

The stock has gained 4.7%, outperforming the industry’s rise of 4.4% in the quarter-to-date period.

Solid Cash Flow From Operation

The company has been generating consistent cash flow from operation since 2017. Net cash flow generated by operating activities surged 31.5% year over year to $802 million in 2019.

Other Stocks to Consider

A few other top-ranked utilities are Energias de Portugal EDPFY, Portland General Electric Company POR and Essential Utilities Inc. WTRG, all carrying the same Zacks Rank as Pampa Energia at present.

Energias de Portugal has a long-term earnings growth rate of 5.66%. The Zacks Consensus Estimate for 2020 earnings has moved 10.8% north in the past 60 days.

Portland General Electric Company delivered an earnings surprise of 7.74%, on average, in the last four quarters. The company has a long-term earnings growth rate of 5.14%.

Essential Utilities has a long-term earnings growth rate of 6.01%. The company delivered an earnings surprise of 9.67%, on average, in the trailing four quarters.

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Energias de Portugal (EDPFY) : Free Stock Analysis Report
 
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Essential Utilities Inc. (WTRG) : Free Stock Analysis Report
 
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Zacks Investment Research