Roger S. Conrad

Roughly 10 percent of Utility Report Card companies have yet to report Q2 results and update guidance. That’s more than enough of a sample to draw one very powerful conclusion:

In the worst economy in 90 years, the utilities and essential services business model has proven its resilience.

Last quarter, US GDP contracted 9.5 percent and most of the world did much worse. But most coverage universe companies posted stable earnings that supported dividends and strong balance sheets. And they kept long-term growth strategies on track.

Utilities that diversify too far from regulated essential services usually wind up getting burned. But once in a while, a company with staying power is in the right place at the right time. That’s the case for MDU Resources.

In the May 23 Utility Roundup, I highlighted Southern Company’s (NYSE: SO) “secret weapon” in its odyssey to bring new nuclear construction over the finish line at the Vogtle site in Georgia: Observation of the startup and two years of operations at four facilities in China, built on the same AP1000 reactor model.

Q2 results and guidance updates are in for roughly nine in ten companies in our Utility Report Card coverage universe. And they’re in for 35 of the 40 represented in the Model Portfolios. I’ll send an Alert if the view changes for the handful left to report.

Oil prices have stabilized around $40 a barrel the past two months. And a hotter than anticipated summer has pushed North American benchmark natural gas to more than $2 per million British Thermal Units.

Many analysts exclusively use big data to discover major economic and stock market trends. My problem with that is if you’re always 30,000 feet up, you’ll miss a lot of what’s happening on the ground. Utilities and essential services companies touch literally every corner of the economy. Consequently, talking a walk through their results every quarter is a great way to discern big picture trends from the ground up.

Roger Conrad will host an online chat for Conrad's Utility Investor subscribers on Aug. 13, 2020 at 2 PM Eastern time.

If you own shares of Conservative Holding Brookfield Renewable Partners (TSX: BEP-U, NYSE: BEP), you’ll soon notice they currently trade in the low 40s, versus a low 50s price just a few days ago. Don’t despair. The price change is the result of a uniquely structured 5-to-4 stock split. The overall value of your Brookfield position has not changed.

The numbers were never going to be pretty for North American energy midstream companies. Management teams warned this spring that Covid-19 fallout was crushing volumes on both the upstream and downstream ends of the business. But with Kinder Morgan Inc. (NYSE: KMI) clearly managing these turbulent times, investors can afford to remain patient with this sector.