In Focus

Unscrambling Xcel Energy (NYSE: XEL)

Using The Chicks' Dozen to check out Xcel
by Chick Karin

NOTE: All this week in the Chicks' Eye View we will be featuring companies based in the home state of five Chicks -- Minnesota. It's the BIG WEEK of the Chick Fest, which will also be taking place in Minnesota so we thought we'd highlight some home grown businesses. But if you're visiting God's country, beware of the mosquito.

1. Buy What You Know  This is probably going to sound really stupid, but the first I heard of Xcel Energy was when they christened the new ice arena in St. Paul, Minnesota. It's now called the Xcel Energy Center. Shows how much I pay attention to my gas and electric bill. I thought I was still paying it to NSP, Northern States Power, when in fact, my bank auto payments are going directly to Xcel Energy. I was using them without even knowing it. Now that I know that I know it, what do they do?

Xcel Energy is the nation's fourth largest utility company serving both electricity and natural gas customers. It was formed in August of 2000. (That's probably why I didn't know it changed names. I have been in Canada since then, but am down in "The Cities" today getting ready for Chick Fest. Ya coming?) NSP merged with Denver based New Century Energies to form Xcel and now serves 12 states and has revenues of more than $11 billion.

2. Keep It Simple Sister  Gas, Electric and the Bird Cam. Yep, a Bird Cam. When I was perusing their website, the Bird Cam caught this Chick's eye. NSP was the first utility company to provide nest boxes on power plant smokestacks for endangered peregrine falcons and osprey. It's a queer little heart-tugger, but the pictures from the Cam are beautiful. Their website keeps track of the recently hatched chicks and lets folks know of their whereabouts throughout the year. It's a great soap opera to follow from April 'til June, from eggs laid to hatching. Just what the world needs... more chicks! (By the way, Chick Megan is set to give birth to another Chick any second!! Stay tuned!)

3. Industry The electric industry is changing dramatically and will do some more over the next few years. Remember when you could only use one long distance service, and then -- BAM -- you could choose from over 20? The same is happening with energy companies. This is part of the reason for the heavy advertising that Xcel is doing (which involved the naming of the downtown complex). Soon you will have a choice of which electric company you want to subscribe to. Hint: Go with the one that offers free air miles with every energy dollar spent. Air miles are good.

4. Leader In Its Field  Again, it's the fourth largest in the country, I'd have to say that's a leader, but with room to grow. (Wish my pants were affording me some room to grow. I'm telling ya, summer has done a number on my waistline.)

5. Repeat Profitability  Of course there is the repeat viewing of the Bird Cam, or the repeat Minnesota Wild games at the Xcel Energy Center, but that wouldn't be the biggest chance of a repeat profit from their customer. We need heat and light. I need to pop popcorn in my microwave. I like cold beer. My toilets don't flush without the pump working... the pump needs electricity. I'm a day-in-day-out Xcel customer. Beer and toilets flushing.

I found the following numbers by clicking Research: Company (located on this page's left menu) and typing in XEL. I decided to use the annual numbers instead of the quarterly numbers because the energy business varies from quarter to quarter. All numbers are in millions of U.S. dollars.

See: Income statement | Balance sheet

6. Gross Margins

(Revenue - Cost of Revenue) / Revenue

(11,591.8 - 4,012.7) / 11591.8 =

7579.1 / 11,591.8 = .6538

Change to percentage: .6538 x 100 = 6 5%

Xcel is energized with their gross margins being greater than our 50% requirement.

7. Net Margins

Net Income / Revenue

545.8 / 11,591.8 = .047

Change to percentage: .047 x 100 = 4.7%

Losing some steam with net margins not quite as high as we like them at 8%.

8. Cash to Long Term Debt

Cash = 216.5, Long Term Debt = 7,583.4

I always like to put a numerical figure to the ratio so I divide it out like this:

216.5 / 7,583.4 = .028

I like this number to be at least 1.0.

9. Flow Ratio

(Current Assets - Cash) / (Current Liabilities - Short Term Debt)

(3,128.1 - 216.5) / (4,671.8 - 1,475.1) =

2,911.6 / 3,196.7 = .91

Wooo Hoooo! They are on fire! Electric, exhilarating, and spine-tingling! They are under our Chick required Flow Ratio of 1.5!! Way to manage your assets and liabilities Xcel!

10. Increasing Growth

(Revenues This Yr - Revenues Last Yr) / Revenues Last Yr

11,591.8 - 7,815.5 / 7,815.5 =

3,776.3 / 7,815.5 = .4832

Change to percentage: .4832 x 100 = 48%

11. Strong Management Mr. Wayne Brunetti is President and Chief Executive Officer of Xcel Energy Inc. and has been since their August 2000 merge. Before that, he served as Chairman, President and Chief Executive Officer of NCE, where he was the Chief Operating Officer before becoming the CEO. (NCE was the company that merged with NSP... both power companies.) Mr. Brunetti holds a bachelor of science degree in business administration from the University of Florida, and is a graduate of the Harvard Business School's Program for Management Development. Xcel has a woman as the Vice President and Chief Financial Officer... gotta like that. Her name is Cynthia Lesher and she if fifty-two years old and a whippersnapper. Cynthia was the President of the NSP when the two companies merged and she took on her new role.

12. On Sale
52 Week Range: 20.13 - 31.86
Median Price: 25.99
Today's Price: 28.87