BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate BUSINESS DESCRIPTION CenterPoint Energy, Inc. operates as a public utility holding company in the United States. STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change 1.18 25.77 7.82 GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues 11.06 25.13 0.07 Net Income -5.59 435.39 2.90 EPS -4.88 426.19 2.56 RETURN ON EQUITY (%) Ind Avg S&P 500 Q3 2017 16.50 9.23 13.41 Q3 2016-5.12 9.52 11.79 Q3 2015-0.17 9.10 12.91 P/E COMPARISON BUY Sector: Utilities: Non-telecom Sub-Industry: Multi-Utilities Source: S&P BUY RATING SINCE 01/09/2017 TARGET PRICE $39.39 Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years Rating History HOLD BUY HOLD BUY Volume in Millions 2016 2017 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History TARGET PRICE $39.39 40 38 35 33 30 28 25 23 20 18 15 40 20 0 21.91 EPS ANALYSIS¹ ($) 23.58 Ind Avg 25.45 S&P 500 RECOMMENDATION We rate () a BUY. This is driven by some important positives, which we believe should have a greater impact than any nesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and solid stock price performance. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. HIGHLIGHTS The revenue growth came in higher than the industry average of 1.9%. Since the same quarter one year prior, revenues rose by 11.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share. Q1 0.30 Q2 0.18 Q3-0.91 Q4-1.18 Q1 0.36 Q2-0.01 Q3 0.41 Q4 0.23 Q1 0.44 Q2 0.31 Q3 0.39 Compared to its closing price of one year ago, 's share price has jumped by 25.77%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year. 2015 2016 NA = not available NM = not meaningful 2017 1 Compustat fiscal year convention is used for all fundamental data items. The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Multi-Utilities industry and the overall market, 's return on equity exceeds that of both the industry average and the S&P 500. ' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, turned its bottom line around by earning $0.99 versus -$1.61 in the prior year. This year, the market expects an improvement in earnings ($1.33 versus $0.99). The change in net income from the same quarter one year ago has exceeded that of the Multi-Utilities industry average, but is less than that of the S&P 500. The net income has decreased by 5.6% when compared to the same quarter one year ago, dropping from $179.00 million to $169.00 million. Report Date: PAGE 1
PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) 0% 30% DTE UNFAVORABLE MDU 15% DTV VVC NI EBITDA Margin (TTM) CMS WEC FAVORABLE BKH SCG AEE 50% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $3.5 Billion and $21.9 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) 0% 30% NI BKH VVC NIUNFAVORABLE DTE CMS MDU AEE 3% WEC Earnings Yield (TTM) SCG FAVORABLE DTV 10% Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between 1.7% and 25.1%. Companies with NA or NM values do not appear. INDUSTRY ANALYSIS The US multi-utilities industry includes electricity, gas, coal, and water utilities. Privately held companies compete with public-owned utilities and cater to a diversified end-user base. Major players are CMS Energy (CMS), Avista (AVA), and Dominion Resources (D). For a long time, the industry was characterized by regional and national monopolies, state ownership, price regulation, and long-term price agreements. However, a wave of deregulation and privatization in 1996 encouraged new entry. The industry is capital intensive and highly competitive due to lower entry barriers. Lower switching costs for end-consumers and a lack of product and service differentiation has intensified competition. Investor-owned units represent 8% of the total number of electric utilities, but represent a staggering 75% of total US generating capability and revenue. These companies are regulated by the Federal Energy Regulatory Commission (FERC), which oversees interstate electricity sales rates, hydroelectric licensing, natural gas pricing, and oil pipeline rates. FERC also reviews and authorizes liquefied natural gas (LNG) terminals, interstate natural gas pipelines, and non-federal hydropower projects. However, the industry has experienced significant deregulation over the last two decades. In a liberalized environment, investors lean on forwards and futures options as tools to hedge against unexpected price risks. These regulatory changes have spurred a new set of competitive power suppliers. According to Boston Pacific, competition from electricity suppliers with the utilities that provide power to end users has contributed about 36% to the overall price decline. Apart from deregulation, growth drivers include cross border trading, geographic expansion, IT enhancements, competition, and increased demand. Industry buyer power is relatively, given the wide variety of potential customers and the indispensable nature of services. US household electricity consumption has increased 21% since the 1970s and the Edison Electric Institute estimates another 30% increase by 2030. Natural gas consumption is expected to rise to as much as 24 trillion cubic feet by 2016 from about 23 trillion cubic feet today. Multi-utilities are marred by fluctuating input costs of natural gas and coal. The industry faces economies of scale challenges as infrastructure and maintenance costs are exorbitant. Utilities do not have substitutes and demand is inelastic, indicating that price changes have little impact on consumption levels. The deregulated industry has become characterized by high debt since the collapse of Enron. Weak credit ratings further reduce the ability to increase capital. A number of firms within the sector have endured margin declines and are selling off assets to meet debt repayment obligations. Industry outlook is mixed. Lower fuel prices and electricity rates hurt profits while resurgent economic activity is bolstering demand. Increased need for all types of generation capacity - natural gas, coal, nuclear, and renewable energy is anticipated. Federal legislation limiting carbon emissions will be a significant regulatory shift over the next five years. PEER GROUP: Multi-Utilities Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) 30.01 12,935 21.91 9,057.00 597.00 NI NISOURCE INC 27.53 9,272 33.17 4,803.30 269.70 SCG SCANA CORP 43.17 6,157 13.70 4,305.00 450.00 VVC VECTREN CORP 69.50 5,769 25.65 2,645.20 224.40 MDU MDU RESOURCES GROUP INC 27.95 5,459 23.49 4,294.21 231.62 BKH BLACK HILLS CORP 58.51 3,466 22.33 1,707.91 144.55 WEC WEC ENERGY GROUP INC 69.49 21,929 22.86 7,556.50 966.70 DTV DTE ENERGY CO 56.21 21,407 10.29 12,210.00 978.00 DTE DTE ENERGY CO 115.57 21,407 21.17 12,210.00 978.00 AEE AMEREN CORP 63.96 15,519 25.38 6,131.00 615.00 CMS CMS ENERGY CORP 49.90 14,072 25.85 6,445.00 540.00 The peer group comparison is based on Major Multi-Utilities companies of comparable size. Report Date: PAGE 2
Annual Dividend Rate COMPANY DESCRIPTION CenterPoint Energy, Inc. operates as a public utility holding company in the United States. The company's Electric Transmission & Distribution segment offers electric transmission and distribution services to retail electric providers, municipalities, electric cooperatives, and other distribution companies. As of December 31, 2016, this segment owned 28,702 pole miles of overhead distribution lines and 3,692 circuit miles of overhead transmission lines; 23,937 circuit miles of underground distribution lines and 26 circuit miles of underground transmission lines; and 232 substations with a capacity of 60,854 megavolt amperes. Its Natural Gas Distribution segment sells regulated intrastate natural gas; provides natural gas transportation and storage services for residential, commercial, industrial, and transportation customers; and offers unregulated services comprising residential appliance repair and maintenance services, as well as sells heating, ventilating and air conditioning equipment. As of December 31, 2016, this segment owned approximately 74,000 linear miles of natural gas distribution mains. The company's Energy Services segment provides physical natural gas supplies primarily to commercial and industrial customers, and electric and natural gas utilities; natural gas management services; and physical delivery services, as well as procures and optimizes transportation and storage assets. It owns and operates approximately 200 miles of intrastate pipelines; and leases transportation capacity on various interstate and intrastate pipelines, and storage. Its Midstream Investments segment offers gathering, processing, compression, treating, dehydration, and fractionation of natural gas liquids for producer customers; and interstate and intrastate natural gas pipeline transportation and storage services to natural gas producers, utilities, and industrial customers. The company was founded in 1882 and is based in Houston, Texas. 1111 Louisiana Street Houston, TX 77002 USA Phone: 713-207-1111 http://www.centerpointenergy.com STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 3.5 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 60% of the stocks we rate. Total Return 4.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 80% of the companies we cover. Efficiency 2.5 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 40% of the companies we review. Price volatility 3.0 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 50% of the stocks we monitor. Solvency 3.0 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 50% of the companies we analyze. Income 4.5 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 80% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. Report Date: PAGE 3
Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial 0.29 Q4 FY17 1.33 E 2017(E) 1.43 E 2018(E) INCOME STATEMENT Net Sales ($mil) 2,098.00 1,889.00 EBITDA ($mil) 548.00 608.00 EBIT ($mil) 279.00 284.00 Net Income ($mil) 169.00 179.00 FINANCIAL ANALYSIS 's gross profit margin for the third quarter of its fiscal year 2017 has decreased when compared to the same period a year ago. Even though sales increased, the net income has decreased. has liquidity. Currently, the Quick Ratio is 0.63 which shows a lack of ability to cover short-term cash needs. The liquidity decreased from the same period a year ago, despite already having liquidity to begin with. This would indicate deteriorating cash flow. At the same time, stockholders' equity ("net worth") has remained virtually unchanged only increasing by 4.20% from the same quarter last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the future. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.thestreetratings.com. BALANCE SHEET Cash & Equiv. ($mil) 1,258.00 1,084.00 Total Assets ($mil) 22,135.00 21,286.00 Total Debt ($mil) 8,681.00 8,551.00 Equity ($mil) 3,618.00 3,472.00 PROFITABILITY Gross Profit Margin 26.12% 32.19% EBITDA Margin 26.12% 32.18% Operating Margin 13.30% 15.03% Sales Turnover 0.41 0.34 Return on Assets 2.69% -0.83% Return on Equity 16.50% -5.12% DEBT Current Ratio 0.91 1.05 Debt/Capital 0.71 0.71 Interest Expense 100.00 108.00 Interest Coverage 2.79 2.63 SHARE DATA Shares outstanding (mil) 431 431 Div / share 0.27 0.26 EPS 0.39 0.41 Book value / share 8.39 8.06 Institutional Own % NA NA Avg Daily Volume 2,694,711 2,787,519 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. Report Date: PAGE 4
RATINGS HISTORY Our rating for has not changed since 1/9/2017. As of 11/30/2017, the stock was trading at a price of which is 1.5% below its 52-week high of $30.45 and 27.3% above its 52-week low of $23.57. 2 Year Chart HOLD: $16.95 BUY: $22.01 2016 HOLD: $22.71 BUY: $24.88 $35 $30 $25 $20 MOST RECENT RATINGS CHANGES Date Price Action From To 1/9/17 $24.88 Upgrade Hold Buy 8/8/16 $22.71 Downgrade Buy Hold 5/11/16 $22.01 Upgrade Hold Buy 11/30/15 $16.95 No Change Hold Hold Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 11/30/2017) 44.19% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.85% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 24.96% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 VALUATION BUY. This stock's P/E ratio indicates a discount compared to an average of 23.58 for the Multi-Utilities industry and a discount compared to the S&P 500 average of 25.45. For additional comparison, its price-to-book ratio of 3.58 indicates a premium versus the S&P 500 average of 3.24 and a premium versus the industry average of 2.30. The price-to-sales ratio is well below both the S&P 500 average and the industry average, indicating a discount. The valuation analysis reveals that, seems to be trading at a discount to investment alternatives within the industry. Price/Earnings 21.91 Peers 23.58 Average. An average P/E ratio can signify an industry neutral price for a stock and an average growth expectation. is trading at a valuation on par with its peers. Price/Projected Earnings 20.99 Peers 19.51 Premium. A higher price-to-projected earnings ratio than its peers can signify a more expensive stock or higher future growth expectations. is trading at a premium to its peers. Price/Book 3.58 Peers 2.30 Premium. A higher price-to-book ratio makes a stock less attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. is trading at a significant premium to its peers. Price/Sales 1.43 Peers 2.58 Discount. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a significant discount to its industry on this measurement. DISCLAIMER: Price/CashFlow 8.58 Peers 8.85 Average. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. is trading at a valuation on par to its peers. Price to Earnings/Growth 0.66 Peers 3.08 Discount. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. trades at a significant discount to its peers. Earnings Growth lower higher 426.19 Peers 11.75 Higher. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. is expected to have an earnings growth rate that significantly exceeds its peers. Sales Growth lower higher 25.13 Peers 8.07 Higher. A sales growth rate that exceeds the industry implies that a company is gaining market share. has a sales growth rate that significantly exceeds its peers. The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. Report Date: PAGE 5