Ahead Of The Bell: Analyst Notes Utilities' Risks

NEW YORK (AP) — Lower commodity prices and regulatory risk will likely hurt profits for a number of utilities, an analyst said as he adjusted his earnings estimates and price targets of several companies in the sector.

Jefferies & Co. analyst Paul Fremont said he expects companies such as Exelon Corp., First Energy Corp., Public Services Enterprise Group Inc. and CenterPoint Energy Inc. to see profit erosion from continued commodity price weakness.

He lowered Exelon's 2009 and 2010 profit estimates by 10 cents and 50 cents to $4.10 and $4.10 per share, respectively. Fremont lowered First Energy's 2009 and 2010 earnings forecasts by 40 cents to $4.35 and $4.55, respectively. For Public Services Enterprise Fremont maintained his previous 2009 profit estimate of $3.05, but dropped his 2010 estimate by 20 cents to $3 per share.

He told a different story for CenterPoint Energy, noting that its stock is undervalued, as he maintained his 2009 and 2010 earnings per share estimates.

Fremont also warned that utilities such as Duke Energy Corp., CenterPoint Energy, Dominion Resources Inc. and Exelon all could face regulatory risks in the future.

Duke Energy is fairly valued, Fremont said, as he maintained his 2009 and 2010 earnings forecasts at $1.20 and $1.30, respectively. He also maintained his 2009 and 2010 profit estimates for Dominion at $3.20 and $3.40, respectively, but mentioned that the stock is expensive.