Credit Suisse Sees Earnings Surprises at These 4 Utilities

Credit Suisse updated its target prices and estimates for the first quarter of 2015 for the normal sources of quarterly variances in the group, with estimates broadly higher than current consensus, although those gaps likely will close as Wall Street plays catch-up. The stocks with the most upside in the first quarter against the Street, based on Credit Suisse’s updated estimates are CMS, FirstEnergy, American Electric Power and Public Service Enterprise. Considering the time of the year, the firm saw little change in full-year 2015 estimates, assuming companies bank upside in the first quarter to provide cushion for later in the year, similar to what was seen last year.

Overall U.S. power demand was down only 0.5%, compared to the first quarter of 2014, but up 3.8% versus a more “normal” first quarter of 2013, and up a giant 7.2% compared to the mild winter of 2012. With the first quarter and full-year guidance based on normal weather, Credit Suisse would look for those in the Northeast and Mid-Atlantic to be set up to benefit from upward revisions or prospective beats on the print. With big demand quarters still to come, we do not anticipate meaningful adjustments to 2015 fiscal year guidance, with most preferring to bank the extra earnings should summer demand come in light versus expectations.

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Nuclear outages were down materially year over year, at 575 days compared to 771 days in the first quarter of 2014, and are down 40% versus the trailing three-year average of 918 days, with most operators making sure to have their plants fully operational for the 2015 winter period just in case the firm saw a repeat of the extreme temperatures and power price volatility of the 2014 polar vortex. On the regulated side, outage days were down 40 days with Duke Energy Corp. (NYSE: DUK) and Entergy Corp. (NYSE: ETR) both leading the group at 80 and 82 days, respectively.

Shares of Public Service Enterprise were up 1.5% at $41.83 Wednesday morning. The stock has a consensus analyst price target of $43.18 and a 52-week trading range of $34.05 to $44.45.

American Electric Power shares were relatively flat at $56.07, in a 52-week range of $49.06 to $65.38. The consensus analyst price target is $63.92.

Shares of CMS were relatively flat at $34.97, in a 52-week trading range of $27.90 to $38.66. The consensus price target is $37.54.

FirstEnergy shares were flat at $35.5. The consensus price target is $37.50, and the 52-week trading range is $29.98 to $41.68.

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