Natural gas-focused energy company Questar Corp. (STR) reported in-line second-quarter 2013 results, as improvement in its ‘Questar Gas’ and ‘Wexpro’ segments were offset by lower ‘Questar Pipeline’ results.
Earnings per share came in at 22 cents, same as the Zacks Consensus Estimate and the year-ago profit.
Total revenues, at $195.6 million, were up 3.8% from the year-ago level of $188.4 million but came below the Zacks Consensus Estimate of $233.0 million.
Questar Gas: Questar Gas segment income increased from $1.5 million in the prior-year quarter to $2.2 million, mainly buoyed by ongoing customer growth and higher margins. As of Jun 30, 2013, Questar Gas served in excess of 938,300 customers, representing a growth of around 14,000 or 1.5% year over year. This compares with 1.2% rise in the previous year.
Wexpro: The unit’s operating profit increased 4.3% year over year to $41.4 million in the quarter, attributable to efficient operations, low cost and a higher average investment base. Quarterly production of natural gas edged up 3.5% to 14.8 billion cubic feet (Bcf), from 14.3 Bcf in the second quarter of 2012.
Questar Pipeline: Operating income was $28.1 million, reflecting a drop of 8.8% year over year. The quarter’s performance was impacted by lower natural gas liquids prices. The total natural gas transportation volumes in the quarter were 204.8 million decatherms, down from the prior-year level of 218.4 million decatherms.
The general and administrative expenses for the quarter increased 7.0% from the prior-year period to $32.0 million, while depreciation, depletion and amortization costs increased 4.4% to $47.5 million. As a result, total operating expense – at $124.5 million – was up 7.2% from the second quarter of 2012.
As of Jun 30, 2013, Questar had long-term debt (including current portion) of $1,139.7 million, with a debt-to-capitalization ratio of 50.9%.
For 2013, Questar has sustained its previous guidance for earnings in the range of $1.12 to $1.20 per share.
Zacks Rank & Stock Picks
Questar currently retains a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.
Apart from Questar, one can look at AGL Resources Inc. (GAS), MDU Resources Group Inc. (MDU) and National Fuel Gas Co. (NFG) as a good buying opportunity. These utility stocks – also sporting Zacks Rank #2 (Buy) – offer good value and are worth buying now.
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