3 Stocks Pushing The Utilities Sector Lower

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

The Utilities sector as a whole closed the day down 1.3% versus the S&P 500, which was down 0.2%. Laggards within the Utilities sector included American DG Energy ( ADGE), down 9.1%, Pure Cycle ( PCYO), down 2.9%, Gas Natural ( EGAS), down 1.7%, Centrais Eletricas Brasileiras ( EBR.B), down 3.5% and Spark Energy ( SPKE), down 2.8%.

TheStreet Ratings Group would like to highlight 3 stocks that pushed the sector lower today:

Centrais Eletricas Brasileiras ( EBR.B) is one of the companies that pushed the Utilities sector lower today. Centrais Eletricas Brasileiras was down $0.09 (3.5%) to $2.47 on light volume. Throughout the day, 59,578 shares of Centrais Eletricas Brasileiras exchanged hands as compared to its average daily volume of 112,400 shares. The stock ranged in price between $2.44-$2.56 after having opened the day at $2.55 as compared to the previous trading day's close of $2.56.

Centrais Eletricas Brasileiras S.A. - Eletrobras, together with its subsidiaries, generates, transmits, and distributes electricity in Brazil. It projects, builds, and operates generating power plants, and electric power transmission and distribution lines. Centrais Eletricas Brasileiras has a market cap of $3.3 billion and is part of the utilities industry. Shares are down 10.8% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Centrais Eletricas Brasileiras as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on EBR.B go as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Electric Utilities industry average, but is greater than that of the S&P 500. The net income has decreased by 9.8% when compared to the same quarter one year ago, dropping from $437.17 million to $394.20 million.
  • Net operating cash flow has significantly decreased to $334.91 million or 55.81% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for ELETROBRAS-CENTR ELETR BRAS is rather low; currently it is at 15.58%. It has decreased significantly from the same period last year. Regardless of the weak results of the gross profit margin, the net profit margin of 14.59% is above that of the industry average.
  • Looking at the price performance of EBR.B's shares over the past 12 months, there is not much good news to report: the stock is down 48.98%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Electric Utilities industry and the overall market, ELETROBRAS-CENTR ELETR BRAS's return on equity significantly trails that of both the industry average and the S&P 500.

You can view the full analysis from the report here: Centrais Eletricas Brasileiras Ratings Report

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At the close, Gas Natural ( EGAS) was down $0.17 (1.7%) to $9.61 on average volume. Throughout the day, 20,694 shares of Gas Natural exchanged hands as compared to its average daily volume of 21,500 shares. The stock ranged in price between $9.50-$9.75 after having opened the day at $9.75 as compared to the previous trading day's close of $9.78.

Gas Natural Inc. distributes and sells natural gas to residential, commercial, and industrial customers. The company operates through Natural Gas and Marketing & Production segments. Gas Natural has a market cap of $105.2 million and is part of the utilities industry. Shares are down 11.2% year-to-date as of the close of trading on Monday. Currently there is 1 analyst who rates Gas Natural a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Gas Natural as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from TheStreet Ratings analysis on EGAS go as follows:

  • Net operating cash flow has significantly increased by 66.38% to $9.85 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 22.10%.
  • The debt-to-equity ratio is somewhat low, currently at 0.67, 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 0.34 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 17.0%. Since the same quarter one year prior, revenues fell by 12.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • GAS NATURAL INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, GAS NATURAL INC reported lower earnings of $0.26 versus $0.66 in the prior year. This year, the market expects an improvement in earnings ($0.57 versus $0.26).
  • The gross profit margin for GAS NATURAL INC is rather low; currently it is at 17.80%. Regardless of EGAS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.03% trails the industry average.

You can view the full analysis from the report here: Gas Natural Ratings Report

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Pure Cycle ( PCYO) was another company that pushed the Utilities sector lower today. Pure Cycle was down $0.14 (2.9%) to $4.66 on light volume. Throughout the day, 14,073 shares of Pure Cycle exchanged hands as compared to its average daily volume of 32,000 shares. The stock ranged in price between $4.58-$4.84 after having opened the day at $4.72 as compared to the previous trading day's close of $4.80.

Pure Cycle Corporation designs, constructs, operates, and maintains water and wastewater systems in the Denver metropolitan area, the United States. Pure Cycle has a market cap of $113.9 million and is part of the utilities industry. Shares are up 20.0% year-to-date as of the close of trading on Monday. Currently there is 1 analyst who rates Pure Cycle a buy, no analysts rate it a sell, and none rate it a hold.

TheStreet Ratings rates Pure Cycle as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow.

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Highlights from TheStreet Ratings analysis on PCYO go as follows:

  • PURE CYCLE CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, PURE CYCLE CORP continued to lose money by earning -$0.02 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings ($0.00 versus -$0.02).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Water Utilities industry. The net income increased by 108.1% when compared to the same quarter one year prior, rising from -$0.38 million to $0.03 million.
  • PCYO's debt-to-equity ratio is very low at 0.06 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that PCYO's debt-to-equity ratio is low, the quick ratio, which is currently 0.57, displays a potential problem in covering short-term cash needs.
  • Net operating cash flow has significantly decreased to $0.21 million or 90.92% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • PCYO's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 30.79%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

You can view the full analysis from the report here: Pure Cycle Ratings Report

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