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Why PG&E (PCG) Stock Is Falling Today

NEW YORK (TheStreet) -- PG&E (PCG) stock is down 4.6% to $41.64 Friday morning after the utilities company was downgraded to hold from buy at Deutsche Bank.

The downgrade took place Thursday after PG&E announced they expect that the U.S. will bring criminal charges against them over the 2010 San Bruno pipeline explosion.

The company has been speaking with the U.S Attorney's Office in order to resolve the investigation into the explosion.

The U.S. is looking into PG&E due to concerns the company conducted practices that violated the Federal Pipeline Safety Act in areas such as record keeping, pipeline integrity management and identification of pipeline threats.

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TheStreet Ratings team rates PG&E CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate PG&E CORP (PCG) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • PCG's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 3.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Multi-Utilities industry. The net income increased by 1100.0% when compared to the same quarter one year prior, rising from -$9.00 million to $90.00 million.
  • PG&E CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PG&E CORP reported lower earnings of $1.84 versus $1.91 in the prior year. This year, the market expects an improvement in earnings ($3.03 versus $1.84).
  • In its most recent trading session, PCG has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • Even though the current debt-to-equity ratio is 1.01, it is still below the industry average, suggesting that this level of debt is acceptable within the Multi-Utilities industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.42 is very low and demonstrates very weak liquidity.
  • You can view the full analysis from the report here: PCG Ratings Report
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