Jefferies & Company is out with an analyst note this morning, where they upgrade shares of Spectra Energy SE from Underperform to Hold; they have a $20.00 price target on the strike, revised higher from $18.00.
Jefferies analysts cited a recent upgrade to the company’s estimates, where they upgraded 2010 EPS estimates by $0.05 to $1.40 based on higher forecasted oil prices. Spectra's 2010 guidance of $1.42 per share is “predicated on $80/bbl oil, NGL/Crude relationship of 50%, composite NGL barrel of $0.95/gallon and natural gas of $5.50/MCF. Our revised estimate assumes a $78/Bbl oil price and a USD/CAD exchange rate of $1.03.”
Jefferies also noted, “We are increasing our 2011 EPS estimate by $0.05 to $1.65.
Our 2011 EPS estimate is based off of $81.50/bbl oil, NGL/Crude relationship of 50%, composite NGL barrel of $1.00/gallon and natural gas of $5.51/MCF. We are (also) maintaining our 2012 EPS estimate of $1.90.”
Jefferies closed by saying, “The $20.00 price target is based on an EV/EBITDA analysis. For Spectra's regulated distribution business we assign a 7.0x EV/EBITDA multiple, a 7.5x multiple for regulated transmission and a 5.0x for the unregulated commodity business. Based on yesterday's closing price of $21.32, this would result in 12-month price depreciation and total return potential of (6.1)% and (1.4)%, respectively, including the company's current dividend yield of 4.7%.”
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