Deutsche Bank Comments On Public Service Enterprise Group Following Analyst Day

Public Service Enterprise Group's PEG Investor Day meeting reiterated the company's value proposition: a growing utility, well positioned power assets, a strong balance sheet, and disciplined cost control. Utility capex and rate base growth were largely reiterated, though uncertainties on large scale transmission remain. The Power business is well positioned in an evolving market, but BGS transparency remains a focus for investors. Deutsche Bank is raising its 2013 EPS estimate $0.15 to $2.90/sh on updated disclosures and reiterate its Buy rating on a fundamentally cheap SOTP valuation.

Deutsche Bank is maintaining its 2011 and 2012 EPS estimates of $2.65/sh and $2.50/sh, respectively. DB is also raising its 2013 EPS estimate by $0.15 to $2.90 as a result of PEG's new disclosures on power, coal, and nuclear fuel hedging, as well as capacity revenues. Deutsche Bank lowered its O&M cost assumptions to account for mgmt's confidence that it can hold costs flat from 2010-13, although it still assumes some escalation.

Key downside risks include lower gas prices, greater than expected customer migration, lower than expected RPM capacity prices in the May auction, and transmission delays relative to PEG's capital plan.

Deutsche Bank has a $38 PT and Buy rating on PEG

PEG closed Monday at $31.47