2 Energy Companies To Consider From Both An Income And Growth Perspective

Includes: CQP, LNT
by: Matt Schilling

When an analyst upgrades a stock and accompanies that recommendation with a long-term positive outlook, a stock can see a considerable increase in its share price within just a few minutes of that note. With that said, I wanted to focus on two energy stocks that were upgraded recently and some of the variables long-term growth investors should consider.

Cheniere Energy Partners L P (NYSEMKT:CQP) had its coverage upgraded on Friday by Barclays Capital & Credit Suisse. Barclays raised its rating on the stock from an Underweight to an Equal Weight and set a $25.00/share price target. Credit Suisse, who previously rated the company a Neutral, raised its rating on the stock to an Outperform and set a $25/share price target. With regard to their recent upgrade of CQP, Credit Suisse had this to say about the company:

We believe CQP retains a high degree of optionality primarily tied a potential expansion of Sabine Pass and/or success developing the Corpus Christi project. In our eyes, risk/reward is heavily skewed to the upside at these levels.

There are three variables potential investors need to consider before establishing a position in Cheniere. The first variable to consider concerns the continued development at both the Sabine Pass and the Corpus Christi projects. Both projects will be key factors when it comes to the success of CQP, as any progress regarding either expansion should be beneficial to both shareholders and potential investors. The second variable many investors should consider when it comes to Cheniere is the company's earnings history over the last 12 months. Over the course of the last four quarters, CQP has surpassed analysts' estimates by an average of 867.50%. That's pretty impressive considering the fact Duke Energy (NYSE:DUK) has only surpassed estimates by an average of 7.55% over the same 12 month period. The third and last variable comes in the form of the company's dividend. One of the most attractive The company currently yields 7.70% ($1.70) and has been paying shareholders $0.425/share every quarter since June 2007.

Alliant Energy Corp. (NYSE:LNT) had its coverage upgraded by Wunderlich to a 'Buy' from a previous analyst rating of 'Hold' and has also set a $47.00/share price target. As noted by Yahoo! Finance, the Madison, Wisconsin-based firm:

provides regulated electricity and natural gas services to residential, commercial, and industrial customers in the Midwest region of the United States. The company, through its subsidiary, Interstate Power and Light Company (IPL), engages in the generation and distribution of electricity, and distribution and transportation of natural gas in Iowa and southern Minnesota; and generation and distribution of steam in Cedar Rapids, Iowa.

According to Benzinga.com, Wunderlich had this to say about Alliant:

We see accelerating EPS growth in 2014 from LNT's higher rate base in Iowa and expiring capacity payments for purchased power contracts. The lower capacity payments in Iowa create the opportunity to increase rate base and earnings, while potentially freezing customer rates and deferring over-earnings to fund the new gas plant in 2017. We expect LNT to discuss Iowa rate base growth on the 3Q earnings call on November 9, which should drive EPS estimates higher for 2014 and 2015.

From a growth perspective, if the company can continue to demonstrate solid earnings I see no reason why growth-based investors shouldn't establish a position at current levels. From an income perspective, Alliant currently yields 4.00% ($1.80), which is pretty attractive considering names like ExxonMobil (NYSE:XOM) currently yield only 2.50% ($2.28).

Final Analysis

Potential investors looking to establish a position in either CQP or LNT should do so with a small to moderate position and add to that position as both companies' developments begin to enhance bottom line numbers. CQP and LNT also have very promising income potential, since the average yield of both companies is a very healthy 5.90%.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.