One of the hottest stocks in the power sector could have plenty of sizzle left.

Texas Genco ( TGN), which ranked as a top market performer in 2003, has already rocketed another 40% this year. Three-fourths of that gain has come since TheStreet.com first spotlighted the overlooked stock in early May. But the company has the power -- and will soon have the incentive -- to increase its value even more.

For starters, some believe, Genco could finally raise its 2004 earnings guidance -- currently at a range of $3.35 to $3.75 per share -- when it releases quarterly results next month. The company could then boost its value even more, through share buybacks or big dividends, if it falls under new ownership, as expected, just a few months down the road.

Right now, parent company CenterPoint ( CNP) owns 81% of Genco. But CenterPoint plans to shed its generation subsidiary in order to comply with Texas deregulation laws and raise money to pay down its huge debt load. In the meantime, however, CenterPoint has done little -- some say too little -- to boost Genco's valuation ahead of a crucial regulatory hearing, now under way, involving both companies. At stake in the so-called true-up hearing are billions of dollars that CenterPoint is hoping to recover from its investment in Genco before it sells the company.

Already, however, at least one Wall Street analyst has witnessed clues that Genco's earnings -- and its entire value as a company -- could prove higher than most people think. Steve Fleishman of Merrill Lynch recently pointed to comments made in CenterPoint's true-up hearing as evidence of good things to come.

"There was a suggestion that TGN's earnings outlook might be revised upward on the next earnings conference call," Fleishman noted in an industry report published late last month. But "the most noteworthy development thus far seems to have been comments from a CNP executive indicating that CNP had received two bids for its 81% interest in Texas Genco, and the company seemed pleased about the indicative price."

Genco's stock, which has more than doubled in a year, fell 19 cents to $46.85 Monday.

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