|
|
Utilities
|
|
||
Improving Outlook for DTE Energy's Gas, Storage & Pipeline Business; Increasing Fair Value EstimateImproving Outlook for DTE Energy's Gas, Storage & Pipeline Business; Increasing Fair Value Estimate Morningstar Charles Fishman Equity Analyst Analyst Note | by Charles Fishman We are increasing our fair value estimate for narrow-moat DTE Energy to $120 per share from $116 after the company reported 2020 second-quarter operating earnings and reaffirmed earnings and capital expenditure guidance. EPS for the recently ended quarter were $1.53 versus $0.99 in the same period last year. The strong results were due primarily to favorable weather, pension plan investment gains, and rate increases at the utilities. The Gas, Storage & Pipeline business benefited from the Blue Union acquisition. The increase in our fair value estimate was primarily due to the increase in our average annual EPS growth rate estimate to 5% from 4.5%. We are now at the bottom end of DTE's 5%-7% EPS growth guidance off the midpoint of the 2020 guidance range through 2024. Our fair value estimate also benefited from time-value appreciation since our last update. The increase in our EPS growth rate estimate was driven by our more positive outlook for the GS&P business. The LEAP pipeline is expected to be in full service this week, ahead of schedule and under budget. In addition, the Link and NEXUS pipelines should benefit from the recent decision to abandon construction of the Atlantic Coast Pipeline by Dominion Energy and Duke Energy. We increased our 2020 operating earnings estimate by $0.14, to $6.61 per share, the midpoint of the guidance range, due to the solid performance year to date and DTE's comments that earnings pressure from COVID-19 will likely be less than the $60 million outlined in the first-quarter earnings call. However, we note that DTE excluded $0.06 per share of incremental costs associated with the sequestration of employees due to COVID-19 from operating earnings in the recently ended quarter, and our 2020 estimate is now consistent with its adjustment methodology. |
return to message board, top of board |