Northeast Utilities Hits a 52-Week High - Analyst Blog

Shares of Northeast Utilities NU hit a 52-week high of $45.91 and eventually closed at $45.39 at the end of trading on Apr 10. Shares have gained almost 5.9% in the past one-year period. Average volume of shares traded over the last three months came in at 1,647,710.

The company's adjusted earnings edged up 1.8% year over year in the fourth quarter of 2013 and 11% in 2013. The upside was driven by strong financial and operational performance largely owing to synergies from the NSTAR utility merger in 2012.

Northeast Utilities continues to benefit from the NSTAR merger. In 2013, this merger contributed an additional $0.8 billion or approximately 11% to the company's operating revenues. This was, in fact, the first full year for Northeast Utilities as a merged entity.

Again, the company's fourth quarter revenues surpassed the year-ago figure primarily due to strong performance from NSTAR Electric and its subsidiaries. In addition, Northeast Utilities expects cost synergy related to this transaction to be approximately $1 billion over the first 10 years of the merger.

Apart from merger-related growth, the utility is also focused on driving infrastructural improvements. In 2013, the company invested $0.66 billion in electric transmission projects. The company plans to invest $3.7 billion in transmission projects during the 2014 to 2017 period.

For 2014, the company expects operating earnings in the range of $2.60 to $2.75 per share. The Zacks Consensus Estimate for the year is pegged at $2.70, reflecting a year-over-year expected improvement of 6.6%. The company also provided long-term earnings per share growth guidance in the range of 6%–8% from 2012 through 2017.

Looking forward, the NSTAR merger will help the company to expand its scale of operations and customer base, thereby improving cash inflow. In 2013, operating cash flow climbed 43.3% to $1.66 billion from the year-ago level. In Feb 2014, the company increased the quarterly dividend rate by 6.8% to 39.25 cents per share from 36.75 cents per share, bringing the annualized payout to $1.57 per share.

Northeast Utilities currently has a Zacks Rank #2 (Buy). Some other better-ranked stocks in the same sector include NRG Energy, Inc. NRG, Public Service Enterprise Group Inc. PEG and Otter Tail Corp. OTTR. All of these stocks hold a Zacks Rank #1 (Strong Buy).