Public Service Enterprise Group (PEG -0.1%) unveils a $12B five-year capital spending plan, including an additional $2B in utility transmission investments to $6.8B, in an effort to boost earnings growth at its utility segment.
PEG expects its capital spending program to result in a double-digit increase in utility business earnings through 2016.
PEG also will make additional investments to strengthen New Jersey's electric and gas systems against severe weather, if approved by the New Jersey Board of Public Utilities, which is expected to make a decision in April.
The Select SPDR Utilities ETF (XLU +0.4%) has already had a nice run this year - up 9% from an early January low - but technician Michael Kahn sees more gains ahead, noting it popped out of an 8-month trading range last week and money is flowing in (based on a gauge measuring volume on up days vs. down days) for the first time in nearly a year.
Stocks such as Public Service Enterprise (PEG +0.5%) and CMS Energy (CMS -0.1%) are mirroring the ETF's chart, but Kahn sees better opportunities in names closer to 52-week lows. Of note in this category are PG&E (PCG +0.9%) - just out of a trading range and above its 200-day moving average for the first time since the summer - and Southern Co. (SO +0.1%). After moving sideways for six months, Southern has rallied to the top of its range and is pausing at its 200-day moving average. Any continued strength would break both the trading range and the 200-day.
Public Service Enterprise's (PEG +2.6%) Q4 earnings fell 11% on mark-to-market and storm-related impacts, but adjusted profit improved and exceeded expectations.
The PSEG Power subsidiary said operating earnings fell 8.7% Y/Y to $115M on an increase in operating and maintenance expense associated with planned and unplanned outage-related work that offset benefits from stronger margins.
The PSE&G utility segment posted operating earnings growth of 92% to $144M amid higher revenue and lower operating and maintenance expenses from the year-earlier period that included Sandy-related restoration expenditures.
Utility analysts at Credit Suisse list their top utility stocks, preferring exposure to power generation opportunities than the risk of spiking power prices faced by retailers.
The cold start to winter has led to spiking power demand and prices in the Northeast/Mid-Atlantic and parts of the Midwest that are well above recent years, opening up some earnings upside potential for competitive generators, the report says.
Nuclear power plant operators won a significant victory yesterday when the D.C. Circuit Court of Appeals said the U.S. should stop collecting $750M/year for a spent-fuel repository it has never built.
The decision could force the Obama administration to start thinking more seriously about spent-fuel disposal options as alternatives to the canceled Yucca Mountain project in Nevada.
Exelon (EXC), which paid $168M into the fuel-disposal fund in 2012 to lower operating earnings by 4.7%, would benefit most from the decision, a Bernstein analyst says; other winners could include Entergy (ETR), Public Service Enterprise (PEG) and FirstEnergy (FE).
For companies such as Duke Energy (DUK) and Southern (SO), which operate in states where electricity costs are built into regulated rates, consumers may benefit because the fee would no longer be included in their monthly bills.