Why Cleco (CNL) Stock Is Down Today

NEW YORK (TheStreet) -- Cleco (CNL) was falling 8.9% to $48.63 Thursday following a report that Macquarie is having trouble finding investors to back an acquisition of the electric utility company.

The Australian bank was looking to acquire the Lousiana utility company, but Macquaries co-investors balked at the low returns of the potential acquisition, according to Bloomberg.

Spanish utility Iberdrola is reportedly no longer interested in acquiring Cleco. The two companies were reportedly close to striking a deal before Iberdola dropped out of the process.

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Cleco is expected to decide if it still wants to pursue a sale of stay independent, according to Bloomberg.

TheStreet Ratings team rates CLECO CORP as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate CLECO CORP (CNL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. 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:

  • The revenue growth came in higher than the industry average of 5.4%. Since the same quarter one year prior, revenues rose by 17.1%. 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.
  • Net operating cash flow has slightly increased to $34.61 million or 8.43% when compared to the same quarter last year. In addition, CLECO CORP has also modestly surpassed the industry average cash flow growth rate of 2.11%.
  • The debt-to-equity ratio is somewhat low, currently at 0.87, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.43 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • CLECO CORP's earnings per share declined by 13.0% 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 two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, CLECO CORP reported lower earnings of $2.64 versus $2.70 in the prior year. This year, the market expects an improvement in earnings ($2.69 versus $2.64).
  • 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.
  • You can view the full analysis from the report here: CNL Ratings Report

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