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One of the U.S.'s colossal energy policy mistakes was the nation's failure to fully-develop nuclear power technology for electricity in the second half of the twentieth century. Thankfully, it looks like the nation is recommitting to nuclear power, and Entergy should benefit. Like the U.S. economy, Entergy (NYSE: ETR), the second largest nuclear power generator in the U.S., is performing well below potential, but expect that to change, relatively soon.
Macroeconomic headwinds will weigh on earnings growth in F2009, due to sluggish power demand, but look for signs of recovery in the second half of the year. In other words, how long can one expect the U.S.'s electric power demand to remain at slow-growth levels? About as long as it takes the U.S. economic recovery to revive.
Further, Entergy's planned spin-off of its non-utility nuclear operations should enable the created company (Enexus) to register stronger growth and a higher valuation than it would under Entergy's operation. The First Call F2009/F2010 EPS estimates for ETR are $6.73/$7.07.
Technically, the chart appears to have put in a bottom around $60 after holding a re-test in April/May 2009; further, ETR's p/e of 13 is reasonable.
Stock Analysis: Entergy is moderate-risk stock. Consider buying a 25% position in ETR now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your ETR position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $47.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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