, unlike many dividend-paying utilities, has had a tough time of late in terms of its share price. Despite a generous 5 percent dividend, investors steadily have bid down the company since the year began, moving the company’s stock into negative territory even as the broader market rose.
Entergy is an integrated energy company engaged primarily in electric power production and retail electric distribution operations. It owns and operates power plants with approximately 30,000 MW of aggregate electric generating capacity, including more than 10,000 MW of nuclear-fueled capacity.
Entergy’s utility business delivers electricity to 2.8 million utility customers in Arkansas, Louisiana, Mississippi, and Texas. It also has a natural gas distribution businesses in Louisiana.
Entergy generated annual revenues of $11.2 billion in 2011 and had approximately 15,000 employees at the end of the year.
“During (the) 13-year period since the end of 1998, Entergy shareholder return has averaged 10.6 percent per year compared to the 6.8 percent annual return for the Philadelphia Utility Index, or about 150 percent of the industry average, ranking in the top quartile of the index members,” Entergy’s Chairman and CEO Wayne Leonard told investors in a call Jan. 31.
“But Entergy’s 2011 total shareholder return was 8.3 percent, significantly below the 19.3 percent return by the Philadelphia Utility Index, ranking us in the bottom quartile.” He promised to turn the trend around.
Entergy is a $11.7 billion market cap company, close to double the size of the average in the electric utilities sector. Its trailing 12-month P/E ratio is 8.77, compared to 11.16 for the sector. The five-year projected price-to-earnings-growth (PEG) ratio is 12.02 vs. 14.54 for the sector.
The projected earnings per share (EPS) growth for the coming year is a negative 3.39 percent, compared to a positive 21.64 percent for its sector.
Analyst views on Entergy are mixed. Columbine Capital, Ford Equity Research and Freidman, Billings, Ramsey & Co. rate it at outperform. EVA Dimensions is the only underperform among the major banks following Entergy. UBS, Jeffries, Merrill Lynch and Citigroup all rate the company neutral.
Capacity to grow
Entergy’s price is less sensitive to the business cycle than other companies, being a public utility, yet it it has the capacity to grow, say the analysts at Thomas White International.
“We project it will grow with average persistence and at a long-term rate of 4 percent. Its overall financial quality is high versus other firms,” they wrote in a recent report.
“The investor-related influences in our risk profile model include the stock’s above average 5.0 percent dividend yield, its NYSE membership, its 80 percent institutional ownership, its market capitalization of $11.77B and its below average sensitivity to market moves (0.53 beta).”
Entergy next reports on April 26.
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