Tags: Xcel | Energy | income | XEL

Xcel Energy Price Bumped Up by Income Investor Interest

By    |   Wednesday, 01 August 2012 12:50 PM

Xcel Energy (XEL), as a regulated utility, is more of an income play than a place to look for appreciation. It currently yields 3.67 percent. In addition, low natural gas prices have helped business, management says. Nevertheless, analysts believe that the stock’s price may have been bumped up by income investor interest, suggesting there is little room to rise from here.

Xcel Energy is a holding company with subsidiaries engaged primarily in the utility business. In 2011, Xcel’s continuing operations included the activity of four wholly owned utility subsidiaries that serve electric and natural gas customers in eight states.

These utility subsidiaries are NSP-Minnesota, NSP-Wisconsin, PSCo and SPS, and serve customers in portions of Colorado, Michigan, Minnesota, New Mexico, North Dakota, South Dakota, Texas and Wisconsin.

These companies comprise the continuing regulated utility operations, along with WYCO, a joint venture formed with Colorado Interstate Gas Company (CIG) to develop and lease natural gas pipelines, storage, and compression facilities, and WGI, an interstate natural gas pipeline company.

“The continued low price of natural gas is a hot topic for our industry. With deal closes or recovery mechanisms in all of our states, low natural gas prices are very beneficial for our customer and for Xcel Energy,” XEL Chairman and CEO Benjamin G.S. Fowke III told analysts in a recent call.

“This is especially true as we investments to modernize our systems. Our customers see lower bills, and a lower share of their income is spent on energy consumption.”

Xcel Energy has a market cap of $14.27 billion in a sector, electric utilities, where the average company size is $6.68 billion. Its trailing 12-month P/E ratio is 17.34 and its five-year projected price-to-earnings-growth (PEG) ratio is 3.42.

Its projected earnings per share growth for the coming year is 6.21 percent, compared to a sector average of 5.1 percent.

High yield

Analysts are positive on XEL, with buy or outperform calls from Jefferson Research and Morgan Stanley.

“We expect the stock to realize only modest appreciation in 2012, as it largely consolidates its strong gain in 2011,” wrote Standard & Poor’s analysts in early May, rating the stock a hold.

“The shares advanced 17 percent in 2011 (after an 11 percent gain in 2010), reflecting, in our view, the investor shift into the high-yielding utilities sector as a defense against the extraordinary volatility and often sharp declines in the broader market.”

Xcel Energy next reports on Aug. 2.

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Wednesday, 01 August 2012 12:50 PM
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