Morningstar | DTE Reports Strong 2Q and Hints at Large Pipeline Acquisition; Raising FVE to $103. See Updated Analyst Note from 26 Jul 2018
We are increasing our fair value estimate to $103 per share from $97 after DTE Energy reported strong 2018 second-quarter earnings in every segment, increased 2018 earnings guidance, and indicated that the Link pipeline is experiencing volumes and investments well ahead of previously disclosed forecasts.The second-quarter performance and the positive comments about investment opportunities give us additional confidence that earnings growth from nonutility businesses will more than replace the REF earnings roll-off.
DTE reported strong 2018 second-quarter operating earnings of $1.36 per share versus $1.07 in the same period last year. Favorable weather helped both the electric and gas segments, partially offset by higher O&M. Higher gathering and transport volumes and the lower federal income tax rate pushed operating earnings at the gas storage and pipeline, or GSP, segment to $60 million in the recently ended quarter, 50% higher than the same period last year.
Based in large part on the year-to-date performance, DTE raised earnings guidance to $5.94-$6.32 per share from the previous guidance of $5.57-$5.99 per share. Based on the higher guidance and management’s comments, we have raised our 2018 earnings estimate to $6.25 per share versus our previous estimate of $5.76 per share.
The strong outlook for 2018 is a positive, but what caught our attention and moved our fair value estimate higher was management’s discussion of a possible GSP acquisition the size of Link, which continues to surprise to the upside. In addition, management indicated it would likely increase its investment forecast by $450 million for renewables--likely wind--because of corporate demand. These factors drove the increase in our estimated earnings growth to approximately 6% over the next five years, the midpoint of DTE's 5%-7% guidance. Our prior estimate was 4.7% due in large part to our concern that DTE would not be able to completely replace the loss of REF earnings.
DTE Energy is a holding company. The company is engaged in the generation, purchase, distribution and sale of electricity to customers in southeastern Michigan through its DTE Electric Company subsidiary, as well as in the purchase, storage, transportation, distribution and sale of natural gas throughout Michigan and the sale of storage and transportation capacity through its DTE Gas Company subsidiary. The company's non-utility operations are: gas storage and pipelines, which consists of natural gas pipeline, gathering, transportation, and storage businesses; power and industrial projects; and energy trading, which consists of energy marketing and trading operations.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.