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CenterPoint Energy (NYSE:CNP) (formerly Reliant Energy) offers electric transmission and distribution (T&D) services in the Houston metro area, and sells and delivers natural gas to 3.2 M customers in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma, and Texas. It also has two interstate pipelines, provides field services, and markets natural gas in the eastern US.

On May 5, the company reported Q1 2011 results and produced adjusted EPS of $0.34, which met the consensus. However, revenue fell by 14.42% to $2.587 B. For 2011, the Street expects adjusted EPS to be $1.11 (+14.43%) alongside revenues of $9.1 B (+3.53%). The company’s guidance stated that adjusted EPS should be between $1.04 and $1.14. In 2010, GAAP EPS grew by 5.94% to $1.07, and revenues came in at $8.785 B (+6.09%). The company also has a debt to equity ratio of 2.96.

There are several positives to discuss that should provide a good backdrop for growth. Recently, a favorable ruling by the Texas Supreme Court would allow the company to recover ~$922 M plus interest or $1.85 B. Due to its diverse set of subsidiaries, there should be stable earnings and cash flow. Looking through history, over the trailing 12 months, operating cash flow was healthy at $1.578 B, and in 2010, net income returned to 2008 levels with $442 M. In its electric T&D division, the company has 2.1 million customers, demonstrated consistent customer growth, and revenues have grown every year since 2006. In natural gas distribution, 3.3 million customers provided $231 M in revenues for the company, which is over +85% since 2006.

CNP trades with a slightly overvalued P/E of 16.7. I believe that it should be trading near 16.0 times earnings due to recent negative economic news for the US. However, I believe that the company should hit $20 over the next 15 to 18 months. The Reuters Research Average price target is $19.91.

Additionally, CNP shares have a dividend yield of 4.1%. Year-to-date, CNP is up by 19.72%, and over the past year, it has surged by 45.89%. Here is a recent company presentation (pdf).

AES (NYSE:AES) is projected to grow non-GAAP EPS by 13.82% in 2011 followed by 20.56% growth in 2012. The company is a global power company that provides energy in 28 countries. It is also #150 in the Fortune 500. In 2010, revenues grew by 17.90% to $16.647 B, which beat the Street by over $2B. However, non-GAAP EPS fell by 18.26% to $0.94, but met consensus estimates. GAAP EPS also dropped by 98.98% to $0.01. The company also has a debt to equity ratio of 2.43.

For 2011, the Street expects non-GAAP EPS to rise by 13.82% to $1.07 with revenues of $15.8 B (-4.85%). AES stated in its Q1 2011 Financial Review that non-GAAP EPS should be between $0.97 and $1.03. Q1 2011 non-GAAP EPS came in at $0.22, which was below consensus by $0.04. For 2012, analysts forecast that non-GAAP EPS will increase by 20.56% to $1.29 alongside revenues of $17.8 B (+12.65%). AES also provides its own forecast for non-GAAP EPS of between $1.27 and $1.37.

Due to the global nature of the company's operations, it stands to benefit from even stagnant to slow economic growth because the bottom was reached in 2009. For example, in 2010, the company grew revenues in Latin America by 18.06% to $11.503 B; in Europe, revenues increased by 66.09% to $1.362 B; and in Asia, revenues rose by 64.80% to $618 M. The company also completed 777 MW of construction projects in Asia, Europe, and Latin America. Additionally, with buoyant growth opportunities in countries like Turkey, Chile and Vietnam, AES was also able to invest approximately $1 B in construction and development projects. On April 20, the company agreed to acquire DPL Inc. for $4.7 B in cash and assumed debt. It is the parent company of Dayton Power & Light Company and serves over 500,000 customers in West Central Ohio.

AES trades with a P/E of 14.0 with the trailing 12 months non-GAAP EPS at $0.88. The forward 2011 P/E is 11.6, and the forward 2012 P/E is 9.6. To find a reasonable P/E, I look to 2009, where revenues declined by 12.14% and GAAP EPS fell by 46.15%. P/E then was 12.2. The debt to equity ratio was also higher at 3.84. So, using a P/E of 13.0, I place a price target of $13.75 after all 2011 results have been priced in. Similarly, the 2012 price target is $16.50.

At a current share price of under $12.50, this is a buy. You are looking at a return of over 30% in 20-24 months. I recommend this for investors that are looking for a utility with significant exposure to the emerging markets, but not for risk-averse individuals because AES does not pay a dividend. Year-to-date, AES is +2.13%, and +26.94% since June 10.

New Jersey Resources (NYSE:NJR) released its Q2 2011 results on May 4, and missed the consensus in non-GAAP EPS of $1.70 with $1.54 (-13.48% from Q2 2010), but smashed revenues expectations of $919.0 M by bringing in $976.987 M (+6.38% from Q2 2010). For Q1 2011, NJR beat revenue expectations, but missed the estimate on non-GAAP EPS. For the first 6 months of FY 2011, the operating margin was down to 7.89% from 13.57%. This was mainly due to a 35.49% increase in the cost of nonutility gas purchases.

For 2011, the Street expects non-GAAP EPS to be +6.55% to $2.60 with revenues of $2.8 B (+5.38%). Also, for 2012, it estimates that non-GAAP EPS will rise by 8.07% to $2.81 and revenues to grow to $3.1 B (+10.71%). New Jersey Resources provides natural gas services and renewable energy including transportation, distribution and asset management from the Gulf Coast to the New England regions, including the Mid-Continent region, the West Coast and Canada.

The latest rate increase is projected to provide an additional $32 M for the company's New Jersey Natural Gas segment. Management also believes that it can gain 12,000 to 14,000 customers over the next two years. According to Argus, this would add about $3.4 M to annual gross margin. The company also has the distribution to tap into the shift to natural gas heating in New Jersey and the Northeast. Based on the American Community Survey of the US Census Bureau, 71.7% of New Jersey households heat their homes with natural gas. In 2000, the figure was 66.8%.

NJR has a forward 2011 P/E of 17.0, and forward 2012 P/E of 15.7. Consider that in 2006, GAAP EPS grew by 3.32% and revenues were 4.81%, and the P/E was 18.8. I do believe that the company has good growth potential, but I am wary about regulatory risk and rising operating costs. As such, a P/E of 18.0 is fair, which would peg a price target of $47, using FY 2011 estimates. However, we also believe that it should go to $50.50, when FY 2012 has run its course. So, over 20 to 22 months, you would be looking at capital appreciation of 14% alongside dividend payments. While you hold onto NJR, you collect a dividend yield of 3.2%. The company raised the quarterly dividend to $0.36 from $0.34 in November 2010. This dividend has been raised every year for the past 15 years. I recommend NJR for risk-averse investors. Year-to-date, NJR is up by 2.67%, and since June 10, it is +29.30%.

Source: 3 Utilities to Be Bullish About