Progress Energy Inc.PGN

Morningstar Rating

Stock Research and Analysis

by Travis Miller

Progress Energy, which became one of the largest regulated utilities in the United States when Carolina Light & Power and Florida Progress merged in 2000, recently finished reconfiguring its balance sheet and simplifying its earnings profile. It Read more

Bulls Say

Higher rates in Florida, which are set to take effect in January 2010, should improve returns on capital.

Changing environmental regulations and required infrastructure maintenance offers plenty of investment growth potential during the next decade.

The company has increased its dividend 20 consecutive years, most recently to $2.48 for 2009. The dividend yields 6% at our fair value estimate.

Debt reduction since 2000 provides room in the capital structure to support infrastructure investments that fuel growth. Read more

Bears Say

A rising inventory of vacant homes in Progress' service areas reduces profits and hurts returns on its capital investments.

Rising interest rates pose a threat to dividend-yielding stocks like utilities and could hurt Progress' stock price.

Utility operational costs have increased faster than revenue since 2003, cutting operating margins to 17% from 22%.

Geological concerns have stalled the Levy County nuclear plant project in Florida.

Progress could cut investment in Florida following regulators' decision in January 2010 to lower allowed returns. Read more

Strategy

Since the merger that created Progress Energy, the company has sold off its nonregulated, noncore businesses and focused on maximizing returns from its regulated utilities. To keep up with the growing Read more

Management

CEO and chairman William D. Johnson, 55, stepped into his role just days after Bob McGehee passed away in October 2007. We like that Johnson, the former COO, has been at Progress since 1992 and plans to continue McGehee's regulated growth strategy. Read more

Profile

Progress Energy is a holding company providing electricity generation, transmission, and distribution through its regulated electric utility operating companies in North Read more

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