ALLETE (ALE) Hits 52-Week High On Strong Growth Potential

Shares of ALLETE, Inc. (NYSE:ALE) reached a new 52-week high of $62.19 on Jun 28, before closing the trading session a bit lower at $62.01. This apex improved upon the last 52-week high of $62.16 on Jun 21.

The utility company currently yields a year-to-date return of 24.3%. The trading volume for the session was 0.34 million shares. An expected earnings growth rate of 5.5% for the next five years indicates the scope for further stock price appreciation.

Growth Drivers

ALLETE, Inc’s financial results have been impressive in first-quarter 2016, with the share price rising nearly 9.6% since May 3. The company’s earnings of 93 cents per share surpassed the Zacks Consensus Estimate of 91 cents by 2.2%. The quarterly results were supported by higher cost recovery rider revenue and lower operating and maintenance expenses.

In the years ahead, ALLETE, Inc. anticipates to benefit from its recurring energy revenues, strong cash & balance sheet position and attractive dividend yields. The company aims to achieve average annual total shareholder return of 9−10%, average annual earnings per share growth of 5% and payout ratio of 60−65%. Capital expenditure will likely be $1.2 billion from 2016−2020.

For 2016, ALLETE, Inc’s strong cost control initiatives, higher cost recovery, ALLETE Clean Energy and U.S. Water Services are likely to drive results. Earnings are anticipated to be within $3.10−$3.40 per share range.

Estimates Show Potency

The Zacks Consensus Estimate for ALLETE, Inc. is $3.21 per share for 2016 and $3.54 for 2017. Also, the estimate for the second quarter is 53 cents, representing year-over-year growth of 9.7%.

With a market capitalization of $3.1 billion, ALLETE, Inc. currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the utility industry include Black Hills Corporation (NYSE:BKH) , Korea Electric Power Corp. (NYSE:KEP) and Spark Energy, Inc. (NASDAQ:SPKE) , each sporting a Zacks Rank #1 (Strong Buy)