Why PG&E (PCG) Stock Is Slumping Today

NEW YORK (TheStreet) -- Shares of Pacific Gas and Electric Co.  (PCG) are slumping, down 0.88% to $45.93 after the company announced late yesterday that it may have violated California Public Utilities Commission communications rules in email exchanges connected to ongoing deliberations over its penalties for the San Bruno gas pipeline disaster from 2010.

After the CPUC announced Monday that it's dealing with newly uncovered inappropriate email exchanges between PG&E and senior CPUC officials, the utility company dismissed three executives.

PG&E said the messages "may have violated CPUC rules prohibiting certain ex parte communications," which means communication with decision-makers took place without the knowledge of all parties.

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Separately, 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 multiple strengths, 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 and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.2%. Since the same quarter one year prior, revenues slightly increased by 4.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • PG&E CORP's earnings per share declined by 23.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over 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 ($3.05 versus $1.84).
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that 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. Despite the fact that PCG's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.52 is low and demonstrates weak liquidity.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Multi-Utilities industry and the overall market, PG&E CORP's return on equity is below that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: PCG Ratings Report

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