El Paso Corporation: Buy Alert For This Natural Gas Producer

El Paso Corporation (EP) is taking significant measures to drive revenue and enhance its profitability. The company announced that it has restructured its hedging strategy to provide it with more exposure to rising energy prices. In addition, El Paso continues to grow its pipeline capacities by focusing on key projects. The company’s share price is up 25% on the year.

El Paso Corp. is a natural gas explorer and producer that operates a substantial distribution pipeline consisting of 42,000 miles. The company was founded in 1928, carries a market cap. of $13.74 billion and is headquartered in Houston, Texas.

An Impressive Quarter

El Paso made its shareholders happy on May 8 when the company reported solid first-quarter results. Revenue was up 24% to $1.27 billion. Net income dropped to $219 million from $629 million due to a one-time sale and discontinued operations. After adjusting for one-time items, earnings were up to 33 cents from 18 cents in the same period last year.

The company also noted that it is expecting higher full-year earnings due to a revised hedging strategy that “has enabled us to particpipate in improved natural gas and oil prices.”

Rising Estimates

As energy prices have continued to surge, so have analyst estimates for El Paso. The current-year estimate has advanced to its current projection of $1.49 per share from $1.14 90 days ago.

Zacks analyst Neil Malkin said that, “El Paso’s onshore future looks solid. With an average production weighted reserve to production ratio of 10 years, the company should be able to maintain high single-digit growth rates into the next decade. The E&P is forecasted to grow production between 8%-12% over the next three to four years. This, coupled with favorable oil and gas prices, should lead to higher margins and earnings growth and will offer investors continued strength in the near term.”

The Chart

After setting a new 52-week and all-time high on July 2 above $22 a share, this stock has taken a little breather, settling at the $20 mark. If shares can hold in this area, they should be well positioned to once again challenge the high. On a longer term basis, this company is operating in a very high-demand and high-growth sector. Take a look at the chart below.

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