Unlike France, the United States did not build nearly enough nuclear power plants in the last two decades of the 20th century to accommodate its power needs, and it will spend the next two decades playing catch-up, which is why I'm reiterating my buy rating for Entergy Corp. (ETR), first recommended on May 12, 2009, at a price of $74.31.
Entergy, the second largest nuclear power generator in the U.S. (30,000 megawatts) will be a part of that mix, with its regulated utilities likely to register average earnings per share growth of 5% to 7% over the next three years. Meanwhile, the planned spin-off of its non-utility-regulated nuclear business, called Enexus, holds the promise of even stronger revenue and earnings growth. The First Call FY2009/FY2010 EPS estimates for ETR are $6.37 to $6.70.
Technically, Entergy stock has pulled-back after breaking through $80 resistance in the summer, but view the pull-pack to $76-78 as a buy opportunity. That said, this will probably be the last chance to establish a position and earn an outsized gain with ETR during the current economic expansion cycle, as a $115-120 top is seen.
Stock Analysis: Entergy Corp. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in ETR now; then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your ETR position before December 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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