3 Things You Need to Watch For in Consolidated Edison, Inc.'s Earnings Today

Con Edison reports its Q1 2014 earnings today. Here's what you need to watch for.

Apr 28, 2014 at 11:00AM

Ed

Source: Wikimedia Commons, Russavia. 

Consolidated Edison (NYSE:ED) will report its Q1 2014 earnings after the market closes today, and investors will be watching closely to see whether this dividend stock can pull itself out of the dumps. Here are the three things you need to watch for in Consolidated Edison's latest earnings report.

1. Free cash flow and dividends
Utilities are the stock market stalwarts of cash and dividends. Well, they used to be. Distributed generation opportunities, new government policy, and cheap natural gas are all forcing utilities to undergo some of the biggest business model changes they've ever experienced -- and not everyone's thriving.

For Consolidated Edison, the company has managed to keep its dividend in above-average territory for investors. The utility's current 4.5% yield is significantly higher than the industry average of 3.3%, and its trailing-12-month (TTM) yield beats out other big competitors.

ED Dividend Yield (TTM) Chart

Although Consolidated Edison has kept its yield high, its free cash has suffered as a result. The utility's TTM free cash flow has fallen over 80% since last July, even as other utilities have seen their own coffers overflow with cash.

ED Free Cash Flow (TTM) Chart

2. Regulation, regulation, regulation
Consolidated Edison's free cash flow hasn't suffered due do its distributions alone. It is also undergoing a massive spending spree. While some of its investments are oriented around new ideas (e.g., a 50% stake in 360 MW of solar farms), the company is spending a whopping $12 billion to renovate its New York assets. Nearly half of Con Edison's New York City pipes were installed over 75 years ago, and it's going to cost around $10 billion to bring those pipelines up to proper standards.

If all goes well, those costs could be passed directly to consumers. But with a lackluster U.S. economy, regulators have been wary of hiking rates for cash-strapped customers, and Con Edison may have to bear a bigger portion of the payout than it would like to.

And it's not just consumers who don't want to pay more. Four New York retail natural gas suppliers sued Con Edison two weeks ago, accusing it of passing on procurement-related costs this past winter. It will be interesting for investors to see whether the utility chooses to address this latest issue during its earnings report.

3. Earnings growth
Utilities aren't growth stocks -- they're dividend stocks. But even dividend stocks need some growth to grow dividends, and utilities have been hard-pressed to find it in the past few years. The combination of hard-to-get rate hikes and subdued electricity growth have left utilities with somewhat stagnant sales.

Consolidated Edison,'s revenue grew just 1% for fiscal 2013, and it  expects a 1% decline for fiscal 2014. If growth expectations improve, that'll mean more potential for higher profits. But if they fall, it puts Con Edison in an even stickier situation.

Top dividend stocks for the next decade
Regardless of Consolidated Edison's earnings results this quarter, investors need to know their dividend stock is ready for years and years of consistent returns. A well-constructed dividend portfolio creates wealth steadily while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

 

Justin Loiseau has no position in any stocks mentioned, and neither does The Motley Fool. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

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.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

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. It's also featured on several dozen 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 ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers