Interest Rate Anxiety Leads Argus To Lower Its Price Target On Public Service Enterprise

Argus on Tuesday lowered its price target on the shares of Public Service Enterprise Group Inc. PEG due to a decline in industry-wide P/E multiples and the looming risk of an imminent Fed rate hike.

Even amid the rate risk, Argus feels Public Service is better positioned than its utility peers, given its strong finances and solid management execution. The firm expects the company to benefit from above-average growth in its rate base from infrastructure investment and higher profitability of its non-regulated operations. Over the next several years, Argus sees the company growing its annual dividend by 4–5 percent.

Among the other positives, Argus expects the increased spending on electric transmission and gas pipeline projects to provide higher returns on equity than distribution and generation assets.

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With the company set to report its third-quarter results on October 28, Argus lowered its 2016 earnings per share estimate to $2.88 from $2.90. The firm's 2017 earnings per share estimate now stand curtailed to $2.91 from $2.95. The firm seems earnings impacted by rising depreciation and property taxes at least through the second quarter of 2017. The lowered outlook is, however, above the market consensus.

As such, Argus lowered its price target on the shares of the company to $48 from $52 while reiterating its shares at Buy.

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