Questar Corp. (Stock Reports).

Publication: Buyside

Publication Date: 01-MAY-03

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COPYRIGHT 2003 Adams Business Media

Opinion: Buy

Sub-Industry: Multi-Utilities & Unregulated Power

INVESTMENT OPINION:

Overview

We look for revenues to rise almost 15% in 2003, on improving E&P operations (stemming from both higher Rockies gas prices and growth in natural gas production), higher gas utility rates, and increased wholly owned pipeline capacity. Gross margins should widen on higher gas prices for E&P operations, regulatory rate relief for Questar's natural gas utility, the divestiture of underperforming pipeline units and the absence of losses from data storage facilities. We look for operating earnings (excluding $0.33 a share in 2002, gains on asset sales) to increase 20% in 2003. After adjusting for pension accounting and employee option expense, we see 2003 Standard & Poor's core earnings per share of $2.00. We believe Questar has the potential to realize double digit annual EPS growth each year through 2005.

Valuation

We believe Questar has the most diverse set of substantive EPS drivers...

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