Growth & Income: Chesapeake Utilities

Estimates have been surging higher for Chesapeake Utilities Corporation (CPK). The company recently reported earnings of 17 cents per share for the third quarter of 2010, well ahead of the 2 cent consensus estimate. It also marked the company’s 5th consecutive positive earnings surprise.

The stock has been surging along with the estimates, but valuation remains in check. It is a Zacks #1 Rank (Strong Buy) stock.

EPS Up 31%

Chesapeake recently reported its results for the third quarter of 2010. Earnings per share came in at 17 cents, crushing the Zacks Consensus Estimate by 15 cents. It was a 31% increase over the same quarter in 2009. The acquisition of Florida Public Utility company in late 2009 added 9 cents to EPS in the quarter.

Excluding the results of the acquisition, total operating revenues decline 1.5% year-over-year due to lower residential and commercial revenues in the Delmarva Natural Gas division. Total volumes increased 7.4%, however, due to a 9.8% increase in overall industrial volumes.

Meanwhile, operating income decreased 4.1% over the same period (again, excluding FPU).


Estimates have been rising over the last few quarters as the acquisition continues to outperform expectations.

The Zacks Consensus Estimate for 2010 is $2.56, representing 16% EPS growth over 2009. The 2011 estimate is 3% higher at $2.63.


Since 2000, the company has raised its dividend at a compound annual growth rate of 2.0%. Its payout ratio stands at 49%, slightly below the average for a utility.

Its dividend yield is an attractive 3.4%.


The stock has jumped over 30% higher in the last 6 months – not too bad for a boring utility company. Despite the nice run, valuation remains in check.

Shares are trading at 15.2x forward estimates, a slight discount to the industry average of 16.1x. Its price to book ratio of 1.7 is in-line with its peers.

Chesapeake Utilities Corporation is a utility company operating both regulated and unregulated energy businesses. It provides natural gas services in Delaware, Maryland, Pennsylvania and Florida, and electric distribution services in Florida.

The company was founded in 1859 and is headquartered in Dover, Delaware. It has a market cap of $365 million.

By Todd Bunton

CHESAPEAKE UTIL (CPK): Free Stock Analysis Report

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