Spectra in Neutral Lane - Analyst Blog
15 Mai 2013 - 3:40PM
Zacks
We reaffirmed our Neutral
recommendation on Texas-based natural gas pipeline company
Spectra Energy Corporation (SE), on May 9, 2013.
The company posted stable profits boosted by higher customer usage
but lower transportation revenues dragged down the top line in the
first quarter. The company holds a Zacks Rank #2, which is
equivalent to a short-term Buy rating.
Why
Maintained?
Spectra Energy is one of North
America’s premier natural gas infrastructure plays with a strong
presence in growth markets. These positions should lead to
value-creating growth opportunities in the coming years.
Though we believe commodity price
concerns remain for the near term, the company’s core fee-based
businesses of storage, transmission, distribution and Canadian
gathering and processing have the potential to move the needle
toward solid earnings and cash flow growth in the long run. Spectra
acquired the Express-Platte pipelines from Kinder Morgan and two
Canadian pension funds in Mar 2013. This acquisition enables the
company to diversify its portfolio from the commodity risks related
to natural gas liquids to a growing market of crude oil pipeline
business. The acquisition will likely add $0.03 to $0.05 per share
to annual earnings in the first year. Going forward, Spectra
intends to increase its presence in the oil and refined products
pipelines, storage tanks and terminals business.
Management remains optimistic on
its future performance on the back of its expansion program, which
remains on track. With its market leading position, diversified
asset portfolio and strong investment opportunities, we expect
Spectra Energy to sustain the growth momentum. Additionally,
Spectra plans to invest $1 billion per year through 2015 on
fee-based gas infrastructure growth projects. The company expects
to commission around 8 projects through 2016. Among these projects
- Southern Hills and Sand Hills Pipelines, Front Range Pipeline,
and Texas Express Pipeline, are expected to be come online by
2013.
However, Spectra’s results are
vulnerable to fluctuations in natural gas markets. The proposed
liquid-rich drilling activities by the company clearly suggests
that volatility in natural gas prices will change little going
forward. Major investments in several projects in Canada also
expose Spectra to fluctuations in currency rates that may affect
the results of its operations.
Other Stocks to
Consider
There are other stocks in the
sector that appear more rewarding. These include EPL Oil
& Gas, Inc. (EPL), Dawson Geophysical
Company (DWSN) and SM Energy Company (SM)
, which are expected to perform impressively over the next few
months and carry a Zacks Rank #1 (Strong Buy).
DAWSON GEOPHYS (DWSN): Free Stock Analysis Report
EPL OIL&GAS INC (EPL): Free Stock Analysis Report
SPECTRA ENERGY (SE): Free Stock Analysis Report
SM ENERGY CO (SM): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Dawson Geophysical (NASDAQ:DWSN)
Graphique Historique de l'Action
De Juin 2024 à Juil 2024
Dawson Geophysical (NASDAQ:DWSN)
Graphique Historique de l'Action
De Juil 2023 à Juil 2024