Yankee Gas
WEEK OF JANUARY 1, 2006
Chuck Shepherd’s News of the Weird
LEAD STORY
Ass Backwards: To support its December rate-increase request, the Connecticut utility Yankee Gas Services said it needs more money because too many of its customers have lowered their bills by heeding calls to conserve energy. And a November report commissioned by the U.S. Chamber of Commerce included the proposal that Congress replenish the federal Highway Trust Fund by imposing a special tax on gas-saving hybrid cars (in that those cars consume less fuel than regular cars and therefore pay less in gasoline tax). [Connecticut Post, 12-10-05] [Boston Globe-AP, 11-26-05]
Yankee Gas Services is a subsidiary of Northeast Utilities, which is a company that has been struggling as of late. Their stock has been underperforming over the last six months, especially when compared to the industry, and the market in general. Recently, they decided to divest all competitive businesses and focus on its regulated businesses. This fact, plus projections which point towards a greater increase in earnings per share compared to its peers, has caused UBS, Merrill Lynch, and others to upgrade this stock from neutal to buy. Maybe those earnings increases are due to the raise in prices by Yankee and other subsidiaries; I do not know.
The stock price is underperforming, it has a negative EPS, and during the entire decade of the 1980s it didn’t pay out a dividend, even though it’s been consistently paying out since then. I don’t like companies with negative EPS, though: they have an incalulable P/E ratio (theoretically infinite), and anything over 15 is generally stay-away territory. However, the corporate insiders have been getting awarded large chunks of stock lately, and none have been selling. Long-term options are predicting a fair rise in the stock price. Looking back: over the last five years, the price is down about 15%, but over the last year, the price is up about 8%. If you were interested in buying NU, I’d dollar cost average small chunks of it, and get out as soon as I saw corporate insiders starting to sell.
