The Laclede Group Inc. (LG), the Missouri-based utility provider, saw first quarter 2009 earnings spike on higher sales volumes from its natural gas commodity service segment. The company has surprised on estimates 3 out of the last 4 quarters by an average of 37.40%. LG is trading at 14.7x forward earnings.

Company Description

The Laclede Group is a public utility holding company which operates two main subsidiaries: Laclede Gas Company and Laclede Energy Resources, Inc.

Laclede Gas Company distributes natural gas to 632,000 residential, commercial and industrial customers in St. Louis and other counties in eastern Missouri. Laclede Energy Resources (LER) is a natural gas commodity service provider in St. Louis.

First Quarter 2009 EPS Jumped 46.4%

On Jan 29, The Laclede Group reported first quarter earnings that easily beat Wall Street estimates by 39.22%, or 40 cents a share. Earnings per share climbed 46.4% to $1.42 from 97 cents in the first quarter of 2008, which included a 3 cent loss per share from discontinued operations.

Earnings growth was due to a strong performance from the Laclede Energy Resources division, the company’s non-regulated business segment. Earnings jumped 63% to $14.7 million from $9 million in the year ago period which resulted in contributing a larger share to the company’s first quarter earnings.

The company said LER’s higher earnings were due to higher sales volumes attributable to the contracting for additional pipeline capacity and increased margins on sales of natural gas.

The Laclede Gas division results were similar to the prior year. Earnings were $16.2 million compared to $15.8 million in the first quarter of 2008.

“Our solid financial results in this challenging economic environment and the balanced composition of our earnings between our non-regulated and regulated businesses indicate the strength of The Laclede Group’s operations,” said Douglas Yaeger, Chairman, President and Chief Executive Officer.

Consensus Estimates Rise for 2009

Covering analysts have been optimistic about 2009 earnings. 2009 consensus estimates have risen 15 cents to $2.54 per share in the last 60 days.

Analysts also project earnings to grow at 10% over the next 5 years.

Value Fundamentals

The Laclede Group is a Zacks #1 Rank (strong buy) stock. It is trading with a forward P/E of 14.70. Its price-to-book is 1.62. As you would expect from a utility, the company has a solid 5-year average return on equity (ROE) of 11.69%.

LG also pays a dividend with a current yield of 4.20%.

The Laclede Group is scheduled to report second quarter 2009 earnings on Apr 16.

Zacks Investment Research
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