According to the three analysts, there are four factors that made Xcel Energy to be bullish. The first one is the stock's "historically underappreciated large cap story," which has had a tendency of moving past regulatory headwinds. The second is the quality of earnings, which consistently remain high. The third is multiple ways toward the top end of 4–6 percent growth. The last factor is that the company's wind project is well-placed and firms up rate base growth until the year 2019.
"Legislative and regulatory headway over the past year positions XEL to meaningfully close the ROE gap and realize a valuation that more fully reflects consistent, quality earnings and dividend growth. The five-year plan outlined in December, as well as the $1 billion Rock Creek Wind project announced last month should drive solid rate base growth for a utility of XEL's size through 2020," the analysts wrote in a note to their clients.
For valuation and earnings growth, JPMorgan analysts pointed out project approval along with potential Minnesotan and Texan rate case conclusions in the second half of the current year are tailwinds. The brokerage thinks that given its view of lag catch up exceeding 50bp, successful Rock Creek approval and other upside capex above the base plan thru 2020, the analysts view the top end of the 4–6 percent EPS CAGR guidance as achievable.
Shares closed Wednesday's trading at $42.34.
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