Our Utilities Sizzle But Don't Burn You

8/13/2012


Our Top 15 Utilities portfolio has delivered a total return of 9.7% this year, more than four percentage points ahead of its primary benchmark, the S&P 1500 Utility Sector Index. The latest catalyst, June-quarter results, extended our lead.

Of the 89% of S&P 1500 Index utilities that have reported quarterly results, nearly 70% topped consensus profit estimates, exceeding the broader index's 67% beat rate. More than half of S&P 1500 utilities missed profit estimates in the March quarter.

A couple of factors positioned utilities to post strong operating results: More electric utilities replacing coal with cheaper natural gas, and the nationwide heat wave boosting demand for electricity.

Still, utilities are struggling to produce profit growth. The sector's June-quarter earnings are projected to fall 11%, based on a blend of reported results and estimates for those yet to post. Entering July, the consensus had projected a 17% decline.

Note that our Top 15 Utilities have averaged 14% profit growth, with 13 of the 15 stocks reporting gains. In contrast, the 56 S&P 1500 utilities that have reported June-quarter results averaged a 3% gain, and 45% saw profits decline.

For profiles on two of our favorites, check out Analysts' Choice.

TOP 15 UTILITIES
------- June-Quarter Earnings -------
Company (Price; Ticker)
Div.
Yield
(%)
Actual
EPS
($)
Chg.
(%)
Difference
From
Consensus
($)
Price
Change
Since
Report
(%)
Quadrix
Overall
Score
Industry
Amer. Electric Pwr.
($42; AEP)
4.5
0.77
5
0.06
0.8
49
Electric
Amer. States Wtr.
($44; AWR)
2.6
0.79
16
0.15
5.0
75
Water
Cleco  ($42; CNL)
3.2
0.64
23
0.08
(3.8)
56
Electric
CMS Energy ($24; CMS)
4.0
0.40
54
0.02
(0.6)
53
Diversified
Entergy  ($71; ETR)
4.7
2.11
20
0.45
(1.3)
47
Electric
Laclede Group
($42; LG)
3.9
0.38
(45)
0.07
4.0
39
Nat'l Gas
NextEra Energy
($70; NEE)
3.4
1.26
7
0.10
1.4
48
Electric
OGE Energy ($55; OGE)
2.9
0.95
(9)
0.05
3.6
52
Diversified
Plains All American
($86; PAA)
4.9
1.64
46
(0.01)
(1.9)
80
Services
PNM Resources
($21; PNM)
2.8
0.33
65
0.04
1.0
70
Diversified
PPL  ($28; PPL)
5.1
0.51
13
0.10
2.2
85
Diversified
Public Service Ent.
($32; PEG)
4.4
0.42
(33)
(0.03)
(4.3)
41
Diversified
Sempra Energy ($69; SRE)
3.5
0.98
4
0.17
(1.7)
43
Diversified
Westar Energy
($30; WR)
4.3
0.48
17
0.04
(0.2)
55
Electric
Wisconsin Energy
($40; WEC)
3.0
0.51
24
0.07
(2.5)
64
Diversified
Portfolio Average
3.8
14
0.09
0.1
57
Note: Quadrix scores are percentile ranks, with 100 the best.    

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