Entergy stock rolls on after storms

Although southern Louisiana has experienced a slow recovery following Hurricane Katrina, utility holding company Entergy Corp.’s stock has skyrocketed since the company’s New Orleans subsidiary sustained hundreds of millions of dollars in storm damage in 2005.

After hitting a low of $67.67 on April 13, 2006, Entergy shares closed Thursday at $112.68, continuing an almost-constant upper price trend that kicked into high gear last fall. By the close of trading Friday afternoon, the price was $113.90.

Even an announcement last Tuesday that the company’s first-quarter earnings, though higher from a year ago, would miss Wall Street analysts’ forecasts, didn’t drag down the price.

Entergy, one of only two Fortune 500 headquartered companies in Louisiana, is not alone at trading close to its 52-week high. It’s a common trend among utility stocks, said Chris Ellinghaus, utility analyst with Wall Street Access, an investment analysis firm.

And something of a Wall Street mystery.

“I wish I could figure it out,” Ellinghaus said. “It’s a bit perplexing.”

In 2006, Entergy reported net earnings of $1.1 billion, or $5.36 per share, and operational earnings of $999.7 million, or $4.72 per share, on revenue of $10.9 billion.

In 2005, when the company was hit by hurricanes Katrina and Rita, Entergy posted net earnings of $889.3 million, or $4.19 per share, and operational earnings of $943.1 million, or $4.40 per share, on revenue of $10.1 billion.

Entergy has regulated electricity utilities in Louisiana, Mississippi, Texas and Arkansas and sells natural gas to consumers in New Orleans. In addition, the company has an unregulated unit, Entergy Nuclear, that owns and manages 11 nuclear power plants in the United States and manages another for the State of Nebraska.

The company’s New Orleans-only unit, Entergy New Orleans Inc., has been in bankruptcy protection since October 2005, a move made after Katrina drove away virtually all of its customers and demolished its power and natural gas systems in the city and cut off its cash flow.

Aided by $200 million in federal recovery funds and a rate hike in New Orleans, the unit expects to leave bankruptcy later this year. But ENO is only a small chunk of the holding company, though, at least for now, probably the most visible to the public.

“The industry as a whole has shaken it off,” Ellinghaus said of big hurricanes over the past few years.

Ellinghaus said Entergy probably is benefiting from speculation by investors in the future of nuclear power, especially in the light of potential restrictions on carbon and carbon dioxide emissions and high natural gas prices that have driven up the cost of power generated by that fuel.

On April 17, Entergy said it expects to report first-quarter earnings of $1.01 per share, up from 92 cents per share for the first quarter of 2006 n a jump that would be due primarily to better results at its Entergy Nuclear unit. Analysts surveyed by Thomson Financial had forecast per-share earnings of $1.11 for the latest quarter.

Ellinghaus said it was possible that institutional buyers were loading up on utility stocks because of their history of long-term stability and dividend payouts.

At the same time, he said, takeover speculation could be affecting the market, following the proposed $32 billion buyout of TXU Corp., the largest power generator in Texas by buyout firms Kohlberg Kravis Roberts & Co. and Texas Pacific Group. Ellinghaus said that at the present time, there doesn’t seem to be any specific scenario that investors would be betting on.

“I don’t think they are egregiously expensive,” Ellinghaus said of utility stocks. “But there doesn’t seem to be any catalyst that should have started this six or nine months ago. I don’t think anyone knows why the stocks continue to go up every day.”

In 2000, Entergy and FPL Group Inc., a major Florida-based utility, proposed a $9 billion combination, but the deal fell apart the next year. The merger would have created the then-nation’s largest power retail utility with 6.3 million customers.

New Orleans, September 17, 2005 – Electricians from Entergy Electric arrive on Bourbon Street to continue restoring power to the French Quarter. Electrical service to the city was out for more than two weeks throughout the entire city due to Hurricane Katrina. Win Henderson / FEMA