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On Tuesday, Guggenheim maintained a Neutral rating and a $53.00 price target for Unitil Corporation (NYSE:UTL). The firm's analysis follows Unitil's third-quarter 2024 earnings per share (EPS) of $0.00. Despite the earnings miss, management expressed confidence in achieving the long-term (LT) guidance range for the full year 2024.
Unitil's recent earnings were influenced by increased distribution rates and customer growth. However, these positive factors were somewhat counterbalanced by rising utility operating costs. The company also reiterated its long-term growth rate target of 5%-7%. Guggenheim's own model anticipates a 6.3% compound annual growth rate (CAGR) in EPS from 2024 to 2028, aligning with the company's projections.
The utility's capital expenditure is expected to remain around $910 million through 2028, which is consistent with Guggenheim's estimate of $911 million. This investment strategy includes the potential for additional projects aimed at modernizing the electric sector and bolstering clean energy initiatives.
During a recent call, management pointed out a notable shift in capital expenditures, moving from gas to electric, with significant developments in Massachusetts. This shift is expected to bring incremental value over time. Guggenheim's stance on the company's stock remains neutral, citing valuation reasons, despite Unitil's strong performance narrative. The firm noted that Unitil's shares are currently trading at a substantial premium compared to small to mid-size (SMIDS) and even larger-cap industry peers.
In other recent news, Unitil Corporation reported an increase in Q2 net income to $4.3 million, a slight rise from the previous year. The company is confident in achieving its full-year earnings projections. In a strategic expansion move, Unitil announced the acquisition of Bangor Natural Gas Company for $70.9 million, pending regulatory approval. This acquisition is part of Unitil's capital investment plan, which is set to channel approximately $910 million through 2028.
In addition to these developments, Unitil is working on a utility-scale solar project in New Hampshire, expected to be completed by mid-2025. Despite an anticipated increase in depreciation expense for the gas division, the company's revenue increased by approximately $2.2 million after accounting for revenue transfers.
In other recent news, Unitil Corporation has elected Jane Lewis-Raymond to its Board of Directors. Lewis-Raymond, with a substantial background in the natural gas industry and corporate governance, is set to provide strategic consulting to senior executives across various sectors.
InvestingPro Insights
Unitil Corporation's financial performance and market position align with several key metrics and insights from InvestingPro. The company's P/E ratio of 18.75 and adjusted P/E ratio of 19.42 for the last twelve months as of Q3 2024 reflect the premium valuation noted by Guggenheim. This is further supported by an InvestingPro Tip indicating that UTL is "Trading at a high P/E ratio relative to near-term earnings growth," which corroborates Guggenheim's neutral stance based on valuation.
Despite the earnings challenges mentioned in the article, UTL has demonstrated financial stability. An InvestingPro Tip highlights that the company "Has maintained dividend payments for 40 consecutive years," showcasing its commitment to shareholder returns. This is complemented by a current dividend yield of 3.0% and a dividend growth of 4.94% over the last twelve months.
The company's profitability is evident from its operating income margin of 18.43% for the last twelve months as of Q3 2024. This aligns with another InvestingPro Tip stating that UTL has been "Profitable over the last twelve months," reinforcing management's confidence in achieving long-term guidance.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips for Unitil Corporation, providing deeper insights into the company's financial health and market position.
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