Is Consolidated Edison, Inc. Destined for Greatness?

Let's see what the numbers say about Consolidated Edison (ED).

Apr 16, 2014 at 1:00PM

Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does Consolidated Edison, (NYSE:ED) fit the bill? Let's take a look at what its recent results tell us about its potential for future gains.

What we're looking for
The graphs you're about to see tell Consolidated Edison's story, and we'll be grading the quality of that story in several ways:

  • Growth: Are profits, margins, and free cash flow all increasing?
  • Valuation: Is share price growing in line with earnings per share?
  • Opportunities: Is return on equity increasing while debt to equity declines?
  • Dividends: Are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let's take a look at Consolidated Edison's key statistics:

ED Total Return Price Chart

Source: ED Total Return Price data by YCharts

Passing Criteria

3-Year* Change


Revenue growth > 30%



Improving profit margin



Free cash flow growth > Net income growth

(96.2%) vs. 5.9%


Improving EPS



Stock growth (+ 15%) < EPS growth

28.9% vs. 4.3%


Source: YCharts. * Period begins at end of Q4 2010.

ED Return on Equity (TTM) Chart

Source: ED Return on Equity (TTM) data by YCharts

Passing Criteria

3-Year* Change


Improving return on equity



Declining debt to equity



Dividend growth > 25%



Free cash flow payout ratio < 50%



Source: YCharts. * Period begins at end of Q4 2010.

How we got here and where we're going
Things don't look good for ConEd in its second assessment -- the utility provider earned a mere two out of nine possible passing grades, a big drop from the five passing grades it picked up in last year's assessment. One major source of this weakness is ConEd's weak free cash flow, which has fallen far from its net income during the past several quarters as the company invests heavily in expansions, upgrades, and repairs. As a result, the company's dividend payouts are using far more money than is evidently sustainable under current free-cash-flow levels. Weakening equity-based metrics also contributed to some of ConEd's failing grades today. Can ConEd be able to recover from the damages caused by Hurricane Sandy on the U.S. East Coast? Let's dig a little deeper to find out.

Utility stocks have remained a reliable source of stable cash flow and steady dividend payouts through the tumult of the past decade, as people will always need electricity regardless of the country's economic conditions. However, there are signs that the old reliance is not enough today -- ConEd recently reported lower-than-expected revenue and earnings per share for the fourth quarter, the result of ongoing heavy capital deployment to repair damage from Hurricane Sandy. ConEd's management also expects earnings from ongoing operations to fall by 1% through mid-2014, which has raised skepticism about ConEd's future growth prospects. Through it all, the company continues an annual dividend yield of 4.5%, which ranks it among the highest-paying utilities, ahead of NextEra Energy, Duke Energy, and Dominion Resources:

ED Dividend Yield (TTM) Chart

ED Dividend Yield (TTM) data by YCharts

However, ConEd and other utilities should fear an increase in interest rates and bond yields, which will provide an attractive alternative to dividend stocks for investors who are already worried that utilities may be in for periods of difficulty as distributed solar power becomes more viable.

Fool contributor Bill Foote notes that ConEd recently persuaded the State of New York to freeze rates for two years, a proposal still subject to final approval from New York State Public Service Commission (NYSPSC). The proposal mandates approximately 9.3% return on equity, compared to an earlier proposal from the NYSPSC of 8.3% last year. ConEd also recently announced a four-year, $12 billion capital expenditure plan to strengthen its presence in New York. According to Deutsche Bank, ConEd's partnership with the New York City Economic Development Corporation should also capitalize on increasing demand for energy-efficient solutions, which representa a $279 billion investment opportunity in the U.S.

ConEd joined with Sempra Energy (NYSE:SRE) a mere month ago to build five large-scale solar power plants in California and Nevada, representing a total 360 megawatts of generating capacity. The utility-scale solar farms, which will include Sempra's massive 250 megawatt Copper Mountain plant, should come online by the end of 2015. Fool contributor Justin Loiseau points out that ConEd and Sempra Energy each hold a 50% stake in each plant, diversifying both the risk and the opportunity evenly.

Putting the pieces together
Today, Consolidated Edison has few of the qualities that make up a great stock, but no stock is truly perfect. Digging deeper can help you uncover the answers you need to make a great buy -- or to stay away from a stock that's going nowhere.

Boost your 2014 returns with The Motley Fool's top stock
There’s a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it’s one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Alex Planes has no position in any stocks mentioned. The Motley Fool recommends Dominion Resources. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers