4 Positives From ITC's Conference Call
ITC Holdings held its third-quarter conference call on Oct. 31. CEO Joseph Welch and CFO Cameron Bready announced rising income and earnings for the company. Net income for the quarter was $59 million compared to $51.2 million for the third quarter of 2012. Earnings for the quarter were $66.5 million ($1.26 per share) compared to $56.1 million, or $1.07 per share, the same quarter a year ago.
But it's not just the numbers that are good. Reading the conference call transcript, four other positive things stand out that investors should take note of.
1. The Entergy merger
ITC's much anticipated merger with the spun-off transmission side of Entergy is slowly moving forward in an endless string of regulatory hearings and filings in several Southern states. The transaction was first announced back in December 2011, and when ITC shareholders approved it back in April, management was confident that the deal would be finalized by the end of 2013. But now, it is clear that the merger will still not be completed by year-end. Still, both sides continue to believe that the spinoff and merger will be a win-win.
But Bready also said, in response to an analyst's question, that while the company still believes that the regulators will be satisfied and the Entergy deal will eventually be completed, the company feels comfortable that even if the deal falls through, ITC's stand-alone plans will be enough to drive double-digit growth in the business with or without Entergy's transmission assets. He characterized the Entergy transaction as simply building on ITC's expected overall attractive growth.
2. Progress on capital projects
ITC has several big capital projects in the works, endeavors that will be entering service and starting to generate revenue over the next five years. The first phase of the company's Michigan Thumb Loop project already went into service on time and on budget back in September. The rest of that project is expected to be completed and placed into service by 2015. The Michigan Thumb, jutting into Lake Huron north of Detroit, is projected to have the highest potential for wind power development in the state. The project, when complete, will allow NextEra Energy and CMS Energy to build their planned wind farms in that region.
ITC's Kansas V-Plan project, connecting Eastern and Western Kansas, is on schedule for completion in 2015. ITC also has a part in a series of related Multi-Value Projects in Iowa, Minnesota, and Wisconsin; phases one through four are expected to be done in stages between 2016 and 2018, with phases five through seven expected to come online between 2018-2020.
The company spent almost $650 million on all of these projects combined so far in 2013, and it is two years into a five-year, $4.2 billion capital project investment plan. It's good news that the company is on schedule to see a return on that investment in the coming years.
3. Double-digit growth ahead
In fact, not only is ITC expecting to see a return on those investments, the CFO directly said he expects to see 15%-17% as a compound annual growth rate through 2016, and continuing double-digit growth through the end of the decade. The CEO expects the company's earning growth to be well above the industry average, even without the Entergy transaction.
4. Dividend growth
ITC already announced back in August that it was raising its dividend again this year. On the conference call, the company pointed out that it had raised its dividend every year since going public eight years ago. This year's 13% dividend hike will be the largest yearly increase yet. After seven years of consistently raising the dividend a penny or two, this year investors received a $0.05 increase, from $0.38 to $0.43.
Even better, ITC's leaders said that they anticipate raising the dividend between 10% and 15% every year in the near future, keeping the payout ratio between 30% and 40% as the company's earnings grow. Investors seeking dividend growth rarely get a clearer statement than that.
Foolish bottom line
While the Entergy transmission merger is the main reason that ITC Holdings shows up in the news lately, it's good to know that the company isn't depending on that one event for growth. ITC is the only public company in the U.S. that is entirely focused on owning and operating electric transmission lines, and it is spending big to expand the reach of those power lines. Those capital projects will help drive double-digit growth and rising dividends for investors who stick with the company over the coming years.
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The article 4 Positives From ITC's Conference Call originally appeared on Fool.com.Mike Steele owns shares of ITC. The Motley Fool recommends ITC. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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