Ladenburg cuts PSEG stock rating to neutral on lower EPS forecast

On Wednesday, Ladenburg Thalmann adjusted its stance on Public Service Enterprise Group Inc. (NYSE:PEG), downgrading the stock from Buy to Neutral. The decision was driven by revised earnings projections for the coming years. The utility giant, currently valued at $41 billion, has demonstrated strong financial resilience with a 32% return over the past year and maintains a solid 3.07% dividend yield. According to InvestingPro data, the company has maintained dividend payments for an impressive 55 consecutive years.

Analysts at Ladenburg Thalmann, led by Paul Fremont, revised their forecast model for PSEG, resulting in a lower earnings per share (EPS) estimate for the years 2025 to 2027. The downgrade reflects anticipated decreases in earned return levels at PSEG's subsidiary, Public Service Electric and Gas Company (PSE&G). Additionally, the analysts have adjusted their expectations for realized energy prices at PSEG Power, another subsidiary of the parent company.

The updated model by Ladenburg Thalmann suggests a significantly reduced implied realized energy price for PSEG. The firm now estimates this figure to be $27.14 per megawatt-hour (MWh) in 2024, which is a substantial decrease from the previous hedge price guidance of $38.00 per MWh for the same year, as reported in the third quarter of 2023.

At that time, PSEG had indicated that it was between 85% and 90% hedged for the year 2024. The new forecast by Ladenburg Thalmann signals a more conservative outlook on the company's ability to realize energy prices that align with previous expectations.

The downgrade by Ladenburg Thalmann reflects a recalibration of expectations for PSEG's financial performance based on the firm's latest analysis. This change is likely to be of interest to investors and market watchers following the utility sector and PSEG's financial trajectory.

In other recent news, Public Service Enterprise Group Inc. (PSEG) reported its fourth-quarter 2024 earnings, surpassing analyst expectations with an earnings per share (EPS) of $0.84, slightly above the forecast of $0.83. The company also reported revenues of $2.46 billion, exceeding the anticipated $2.19 billion. Additionally, PSEG successfully completed a $1 billion public offering of senior notes, consisting of $600 million due in 2030 and $400 million due in 2035. These notes were facilitated by major financial institutions, including Barclays (LON:BARC) and Goldman Sachs.

In analyst updates, Jefferies adjusted PSEG's stock price target to $80 from $83 while maintaining a Hold rating. This adjustment reflects the firm's assessment of the company's current valuation and potential market headwinds. Despite these developments, PSEG's stock experienced a decline in pre-market trading, which may reflect broader market trends or investor concerns over future challenges. Furthermore, PSEG's 2025 earnings guidance indicates a potential 9% increase, with plans for a substantial investment of $4 billion in 2025.

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