The following companies in the energy and biotech sectors have recently exceeded expectations on revenue and earnings growth. These earnings reports could act as a catalyst for stock gains over the next few months.
Great Plains Energy (GXP) is a $3.6 billion mid-cap company involved in the generation, transmission, and distribution of electricity. The company generates electricity through coal, natural gas, oil, nuclear, and wind resources. Great Plains has 6,600 megawatts of generating capacity and sells electricity to 825,300 customers in Missouri and Kansas.
Great Plains Energy reported first quarter revenue of $542.2 million, which beat expectations by 4.9%. Earnings per share of $0.17 beat expectations by 54.5%.
The company is trading just slightly above its book value per share of $21.79 as indicated in the price to book ratio of 1.08. This gives the stock an attractive valuation. Great Plains' gross margin of 43% is higher than the industry's gross margin of 37%. The dividend pays $0.87 per share and yields 3.6%. GXP is expected to grow earnings annually at 6.4% for the next five years. Great Plains Energy looks like a relatively steady dividend paying investment.
Energy Transfer Equity, L.P. (ETE) is a $16.8 billion master limited partnership (MLP) that owns approximately 69,000 miles of natural gas, natural gas liquids, refined products, and crude pipelines. The partnership makes its money through the sale of natural gas to electric utilities, independent power plants, local distribution companies, industrial end-users, and other marketing companies. Since MLP's are treated differently than standard stocks for tax purposes, it is good to have a solid understanding of them. This link provides a comprehensive guide to MLPs.
For the first quarter, Energy Transfer Equity beat revenue expectations by 12.4% and exceeded its earnings expectations by 23%. Revenue of $11.18 billion increased 569% year-over-year.
The partnership doesn't look that appealing in terms of valuation with the price trading at eight times its book value per share. The industry average price to book ratio is only 2.9. ETE had a great run in the past year rising from about $35 to its current price of $60. Although the price may continue to rise in the near term, I think it may eventually level-off a bit due to the rich valuation.
ETE pays a dividend of $2.58 per unit for a yield of 4.4%. The partnership achieved a total operating cash flow of over $1 billion in the past twelve months. ETE's expected annual earnings growth of 20.8% is higher than the industry's expected annual growth of 15%. Energy Transfer Equity should be a steady income producer for the long-term.
Medivation (MDVN) is a $3.8 billion mid-cap biotech company that develops treatments for various serious diseases. The company currently has an FDA approved drug known as Xtandi (enzalutamide) for the treatment of post-chemotherapy metastatic castration-resistant prostate cancer (mCRPC) patients. The company reported up to an 89% decrease in PSA serum levels after a month of taking the medicine. Medivation is also testing the compound, enzalutamide to treat multiple stages of prostate cancer and for breast cancer.
Although Medivation is not yet profitable, first quarter EPS of -$0.36 beat expectations by $0.02, or 5.9%. Revenue of $46.15 million was 19.7% higher than expected. Medivation is expected to end 2013 with negative earnings per share. However, the company is expected to end 2014 in the black with an EPS of $0.48.
The company's balance sheet indicates that the business is sustainable, while it works on becoming profitable over the next year. Medivation has $296 million in total cash and $196 million in total debt. The company has 4 times more current assets than current liabilities. The company had a negative cash flow of $102 million for the past twelve months. However, with the company set to turn a profit next year and with one out of every six men to be diagnosed with prostate cancer in their lifetimes, Medivation looks promising as a future growth stock.
Cytori Therapeutics (CYTX) is a $177 million small-cap biotech that develops cell therapies to treat cardiovascular diseases, burns, and other soft tissue injuries. The company's therapies are based on autologous adipose-derived regenerative cells (ADRCs). Cytori offers the following products: the Celution System, which automates the process of digesting fat tissue, releasing the ADRCs; StemSource Cell Bank, which allows hospitals or tissue bank to cryopreserve ADRCs; Puregraft system, for the fat graft preparation process that washes and filters tissue to remove contaminants; and StemSource 900/MB, research laboratory equipment.
Cytori's revenue of $3.8 million exceeded expectations by 17.6% in the first quarter. Earnings per share of -$0.11 exceeded estimates by 57%. The company is estimating revenue of $15 million for 2013. Cytori expects the majority of 2013 revenue to come from Japan.
The company is not yet profitable and had an operating cash flow of -$32 million for the past twelve months. Cytori has $25 million in total cash and $22 million in total debt. It has 1.9 times more current assets than current liabilities. Cytori is expecting an increase in revenue of 67% year-over-year (from $9 million last year to $15 million this year.
Cytori has a goal for the U.S. to bring its cell therapy to market for treatment of refractory heart failure and to develop treatment for thermal burns combined with radiation injury via a contract from BARDA, a division of the U.S. Department of Health and Human Services. The company received CE Mark approval for marketing Intravase (a reagent to be used with the Celution System for preparing safe and optimized ADRCs for intravascular delivery into the same patient) in Europe. Overall, the company has promise to be a leading global biotech company.