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PNM Resources Issues Outlook, Infrastructure Spending Helps

PNM Resources' PNM board of directors has issued 2018 and 2019 earnings guidance in the range of $1.70-$1.80 per diluted share and $2.00 to $2.16 per diluted share, respectively.

Additionally, the company’s 2017 ongoing earnings guidance has been raised to $1.85-$1.90 per share from the previous range of $1.77-$1.87 per share.

Further, it aims to invest approximately $2.7 billion toward its capital expenditure program for 2018–2022. PNM Resources is an energy holding company that provides electricity services to more than 761,000 customers in New Mexico and Texas through regulated units, PNM and TNMP. Toward this, it aims to invest approximately $866 million toward TNPM and nearly $856 million for PNM transmission and distribution.

Fresh Investment & Customer Growth Helps

The company witnessed year-to-date customer growth of 0.7%. At the TNMP division, performance in the third quarter of 2017 can be attributed to better revenues driven by customer additions that grew by almost 1.3% for the quarter compared with the prior quarter. We expect the increased demand driven by higher customers to be reflected going forward as well.

Overall, we believe that the company is poised to benefit on the back of customer additions and robust capital expenditure planning. Notably, capital expenditure toward energy efficiency programs will aid it to support increased demand in service territories.

We believe that these factors will aid the company to fulfill its targeted 6% ongoing earnings growth through 2021.

Steady Performer & Dividend Growth

PNM Resources has been a consistent performer with earnings surpassing the Zacks Consensus Estimate in the last four quarters, with an average beat of 10%.At the end of the third quarter, the company generated cash and cash equivalents worth $43.1 million, substantially up from the 2016-end figure of $4.5 million. The strong cash flow position of the company, will it aid to meet ongoing capital expenditure and upcoming investments in operations. The company’s net cash flows from operating activities during the first nine months of 2017 amounted to $417.3 million.

Additionally we believe that such robust cash flow generating capability encouraged the company to increase annual dividend and reward investors with a dividend hike of 9.3%, recently in the month of December. (Read more: PNM Resources Rewards Investors, Ups Annual Dividend by 9.3%).

Notably we witnessed Ameren Corp AEE, another utility that recently decided to reward shareholders with a higher dividend. Another utility, WEC Energy Group WEC was also prompted to announce plans of a dividend hike, very recently.

Price Movement                                                 

PNM Resources has outperformed the industry in the last six months. The company’s shares gained 16.5%, compared with the industry’s growth of 4.9%. The outperformance can be attributed to its strong cash generating ability.

Zacks Rank

PNM Resources currently carries a Zacks Rank #2 (Buy). Investors can consider another top-ranked stock in the Utility space like IDACORP, Inc. IDA, that carries the same rank as PNM Resources. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

IDACORP posted positive earnings surprise of 8.43% in third-quarter 2017. Its 2017 current year estimates have risen by 2% to $4.08 per share in the last 60 days.

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