Zacks_Analysts' Blog : Neutral on Integrys Energy - Analyst Blog

We maintain our cautious stance on Integrys Energy Group Inc. (TEG) as the performance of the company during the first half of the year failed to meet our expectation. Lower-than-expected results in the recently concluded quarter are primarily attributable to an increase in operations and maintenance costs and lower wholesale margins for Integrys Energy Services.

The positive attributes of Integrys are its attractive underlying electric and gas utility assets, along with its robust dividend policy. The company also makes regulated investment and strives for operational excellence, which will aid in subsequent bottom-line growth.

Impeding the company's positives are its dependence on weather conditions for higher demand, a turbulent economy which is yet to recover fully from the meltdown, and the decision of regulators for rate hikes. These have the potential to impact the financial performance of the company. Hence, we prefer to remain on the sidelines unless tailwinds from more positive catalysts drive the stock.

During the second quarter earnings call, the company adjusted its earnings per share guidance for 2011 to $3.30–$3.50 given its disappointing results for the quarter. The Zacks Consensus Estimates for third-quarter 2011, fiscal year 2011 and fiscal year 2012 are currently 39 cents per share, $3.32 per share and $3.50 per share, respectively.

Integrys Energy retains a Zacks #3 Rank, which translates into a short-term Hold rating. The company has to compete with Alliant Energy Corporation (LNT) and Wisconsin Energy Corp. (WEC).

Chicago, Illinois-based Integrys Energy Group is a diversified holding company providing products and services in both regulated and non-regulated energy markets through its subsidiaries.