Entergy's Expansion Of Transmission Lines To Drive Growth

We updated a research report on Entergy Corporation (NYSE:ETR) on May 26, 2015. The company’s disciplined investments in its generation and distribution businesses as well as sturdy expansion of transmission lines are expected to boost its financials while at the same time strengthening reliability services for its customers. However, dependence on regulatory authorities for rate relief and price fluctuations in wholesale power markets could be a growth deterrent.

New Orleans, LA based Entergy Corp’s first-quarter 2015 earnings and revenues surpassed the Zacks Consensus Estimate. Both the metrics however declined year over year due to soft performance at Entergy Wholesale Commodities.

Entergy plans to invest $8 billion in the 2015 to 2017 time frame with the major share going to its generation business. The company is also aggressively investing in transmission expansion which includes projects in Arkansas, Texas, Louisiana and Southeast Louisiana. A combination of different types of projects will enable the company to diversify its revenue stream.

To attract industrial customers and create employment opportunities, Entergy Louisiana and Entergy Gulf States Louisiana have requested the Louisiana Public Service Commission to approve their merger. Combining the two companies will enable Entergy to make the required investments in Louisiana’s power infrastructure. The move will improve the company’s ability to draw capital while providing more flexibility.

The company’s installation of emission-control equipment at its facilities and cost containment initiative through human capital management are notable steps. Entergy’s nuclear fleet, along with its complementary and flexible fossil and hydro fleet, gives the company a distinct generation cost advantage over its fossil-fuel based competitors.

On the downside, the performance of Entergy’s regulated utilities depends upon rate relief at regular intervals in the company’s different service areas. The company’s financial performance is also influenced by price fluctuations in wholesale power markets.

Zacks Rank

Entergy Corporation currently has a Zacks Rank #3 (Hold). DTE Energy Company (NYSE:DTE), CMS Energy Corp (NYSE:CMS) and NextEra Energy (NYSE:NEE) are better-ranked stocks in the electric utility space carrying a Zacks Rank #2 (Buy).

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