Emera Inc. (TSX:EMA), one of the largest electric utilities companies in North America, announced better-than-expected first-quarter earnings results before the market opened on May 11, and its stock has responded by rising over 2%. Let’s take a closer look at the quarterly results to determine if we should consider establishing long-term positions today, or if we should wait for a better entry point in the trading sessions ahead instead.
Surpassing expectations by a wide margin
Here’s a summary of Emera’s first-quarter earnings results compared with what analysts had anticipated and its results in the same quarter a year ago.
|Adjusted Earnings Per Share||$1.18||$0.94||$1.03|
|Operating Revenues||$900.3 million||$837.8 million||$1.05 billion|
Source: Financial Times
Emera’s adjusted earnings per share increased 14.6% and its operating revenue decreased 14.3% compared with the first quarter of fiscal 2014. The company’s double-digit percentage increase in earnings per share can be attributed to its adjusted net income increasing 17.1% to $171.6 million, driven by a 25.2% increase to $76.4 million in its Emera Energy segment. Its double-digit percentage decline in revenue can be attributed to mark-to-market impacts, which reduced its operating revenue by $124.3 million, as well as a $43.5 million reduction in trading and marketing revenues.
Here’s a quick breakdown of 10 other notable statistics from the report compared with the year-ago period:
- Revenue increased 6.9% to $446.5 million in its Nova Scotia Power Inc. segment
- Revenue decreased 40.9% to $257.8 million in its Emera Energy segment
- Revenue decreased 6.9% to $105.4 million in its Emera Caribbean segment
- Revenue increased 7.1% to $69.2 million in its Emera Maine segment
- Revenue increased 14.9% to $13.1 million in its Pipelines segment
- Adjusted earnings before interest, taxes, depreciation, and amortization increased 16.1% to $384.2 million
- Operating income decreased 26.8% to $232.1 million
- Total assets increased 9.7% to $10.19 billion
- Weighted average number of common shares outstanding increased 2% to 144.9 million
- Ended the quarter with $305.3 million in cash and cash equivalents, an increase of 38.1% from the beginning of the quarter
Is the post-earnings rally warranted?
It was a solid quarter for Emera, so I think the post-earnings rally in its stock is warranted. I also think the stock could continue higher from here and set new all-time highs over the next several weeks because it still trades at inexpensive valuations and has a high dividend yield.
First, Emera’s stock trades at just 20.3 times fiscal 2015’s estimated earnings per share of $2.07 and only 19 times fiscal 2016’s estimated earnings per share of $2.21, both of which are inexpensive compared with its long-term growth potential.
Second, Emera pays a quarterly dividend of $0.40 per share, or $1.60 per share annually, which gives its stock a 3.8% yield at today’s levels. The company has also increased its dividend 11 times since 2007, making it one of the top dividend-growth plays in the industry today.
With all of the information provided above in mind, I think Emera is one of the top utilities stocks in the market today. Long-term investors should take a closer look and strongly consider beginning to scale in to positions.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Joseph Solitro has no position in any stocks mentioned.