New York City utility giant
Consolidated Edison, Inc. (NYSE:ED) delivers electricity, natural gas, and steam energy to New York City, the most concentrated population center in the US. In addition to Manhattan, Consolidated Edison, Inc. (NYSE:ED) provides energy within a 1,350 square mile area in southeastern New York state and Westchester County.
Back in May, Consolidated Edison, Inc. (NYSE:ED) reported lower-than-expected earnings of $0.69 due to higher operations & maintenance costs related to Hurricane Sandy. Wall Street had been expecting $0.73 for Q412, and full-year guidance of $3.65-$3.85 is likely lower than expected due to a “drag effect” from Hurricane Sandy as well.
Investors are waiting to see the result of Consolidated Edison, Inc. (NYSE:ED)’s 2013 filing with the New York State Public Service Commission, as the company is hoping to earn an additional $400 million based on higher utility rates. This would provide a return on equity of 10.35%, much higher than Con Edison’s 12-month ROE of 8.99%. I’d consider holding off on Con Ed until a decision in the rate case is announced, as the verdict could affect our long-term thesis.
In June, Citigroup upgraded Consolidated Edison, Inc. (NYSE:ED) to “buy” from “hold” with a new $65 price target. The analysts became optimistic on Con Ed following positive meetings with the company’s executive team.
Consolidated Edison, Inc. (NYSE:ED) is participating in a roundtable at the Goldman Sachs Power & Utility conference. The company is also the 10th largest holding in the Utilities SPDR ETF, representing 3.57% of the index.
Foolish takeaway
While power & utility companies may not be the “sexiest” investments, the fact is that slow & steady companies can deliver healthy returns for your portfolio. Furthermore, one of the most important aspects of an investment is evaluating the downside, and the utility sector has performed well through all market cycles.
Readers might consider NextEra Energy, Inc. (NYSE:NEE) and Wisconsin Energy Corporation (NYSE:WEC) based on relative outperformance and strong long-term fundamentals. A third option is Con Edison, pending a successful rate increase with the New York state regulator.
The article Watch These Stocks at Goldman Sachs Power & Utility Conference originally appeared on Fool.com and is written by John Macris.
John Macris has no position in any stocks mentioned. The Motley Fool recommends Wisconsin Energy. John is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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