Entergy stock gains momentum with Louisiana rate plan extension – Evercore ISI
On Monday, Evercore ISI has increased the price target for Entergy Corp (NYSE:ETR), a major utility company, to $120 from the previous target of $103 while maintaining an “In Line” rating on the stock. The firm cites compelling industrial opportunities as the primary driver for this optimistic outlook.
Entergy is expected to benefit significantly from the growth of data centers, with a 5-10 gigawatt pipeline not accounted for in the base plan, particularly in the northern part of its service territory. Additionally, large industrial projects in the Gulf region are anticipated to contribute to the company’s growth.
Entergy is currently projecting an 8-9% compound annual growth rate (CAGR) in industrial sales from 2023 through 2028. However, Evercore ISI suggests that there may be potential for even greater long-term upside.
The extension of the Louisiana formula rate plan (FRP) is highlighted as a factor that would provide more certainty around nearly 40% of Entergy’s three-year capital plan.
The FRP settlement, which was filed last week, is scheduled for discussion at the Commission’s August 14th Business and Executive meeting. This meeting will also cover the System Energy Resources, Inc. (SERI) agreement and the sale of gas local distribution company (LDC) assets.
Despite the positive growth outlook, Evercore ISI acknowledges that storms present a primary risk to Entergy’s operational and financial stability. The Gulf Coast, where Entergy operates, is particularly susceptible to severe weather events. While robust resiliency investments are being made, they will take several years to implement fully.
The uncertainty posed by potential storms includes concerns over cost recovery, revenue loss, balance sheet stability, customer bill increases, and the ability to finance strong dividend and earnings growth. Nevertheless, the firm notes that regulation has historically been supportive of storm cost recovery for Entergy.
In other recent news, Entergy Corporation (NYSE:) has reported steady growth in its recent Second Quarter 2024 Earnings Conference Call. The company announced an adjusted earnings of $1.92 per share, in line with their goal of consistent earnings growth, and a strong net liquidity of $5.9 billion.
Regulatory settlements in Louisiana and with System Energy Resources have been reached, which are expected to positively impact earnings and customer relations.
The company is also progressing with infrastructure projects and growth strategies, including seeking approval for new generation resources in Texas and a gas LDC sale in Louisiana. In addition, Entergy is expanding its renewable energy portfolio, with a large RFP for renewable projects in Louisiana expected in the fall.
Despite a $1.17 settlement charge related to a pension plan lift out and an estimated cost of $75 million to $85 million for Hurricane Beryl restoration efforts, the company affirmed its 2024 adjusted EPS guidance, indicating confidence in its financial trajectory. These are recent developments for Entergy Corporation.
InvestingPro Insights
Entergy Corp (NYSE:ETR) appears poised for growth, with Evercore ISI’s revised price target reflecting the company’s potential in industrial expansion and data center growth. In line with this, InvestingPro data shows Entergy has a market capitalization of $25.83 billion and is trading at an attractive P/E ratio of 14.49, which adjusts to an even lower 11.66 based on the last twelve months as of Q2 2024. This suggests that the stock may be undervalued relative to its earnings potential. Additionally, the company’s dividend yield stands at 3.74%, with a notable dividend growth of 5.61% over the last twelve months as of Q2 2024, indicating a steady return for income-focused investors.
One of the InvestingPro Tips highlights that Entergy has raised its dividend for 9 consecutive years, which is a testament to its commitment to shareholder returns. Furthermore, despite the recent robust price performance, with a 1-month total return of 14.64% as of the date provided, Entergy is still trading near its 52-week high, which could signal continued investor confidence in the company’s future prospects.
For those seeking more detailed analysis, there are additional InvestingPro Tips available, including insights on Entergy’s debt levels, earnings revisions, and stock volatility. For instance, while Entergy operates with a significant debt burden, it has also maintained dividend payments for 37 consecutive years, showcasing a balance between financial obligations and shareholder value. To explore these aspects further, interested readers can find more tips on InvestingPro’s dedicated page for Entergy.
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