Stock Market Update - Thu May 10 10:15:08 EDT 2007

Shares in the owner of California's largest utility have risen nearly 30% over the past year. PG&E Corp's (PCG, 53.16) low-risk fully regulated operations and high level of projected earnings growth, coupled with expected cost savings from its restructuring program have sent shares to multi-year highs. Utilities remain the place to be for investors seeking not only yield, but real growth, which underscores our Overweight rating on the sector

PG&E posted a 20% rise in first quarter profits on higher electricity rates. Per share profits of $0.71 surpassed expectations by seven cents. Revenues grew 6.6% to $3.36 billion, above estimates. The company's Pacific Gas & Electric utility received approval for a $213 million base rate increase back in March.

The utility plans to spend $14.3 billion over the next five years to build out new plants and upgrade equipment. The total capex build out planned by the US utilities has reached lofty levels. The projected spend cycle is the single greatest risk to the sector in our estimation given the group's historical miscalculations.

The company reaffirmed full year guidance of $2.70 to $2.80 in earnings per share, followed by $2.90-$3.00 for FY08. This equates to 7% earnings growth for this year and next. The current consensus estimates stand right at the mid-range of the company's estimates.

--Kimberly DuBord, Briefing.com