Public Service Enterprise Group stock upgraded by UBS on nuclear potential

Investing.com - UBS upgraded Public Service Enterprise Group Inc. (NYSE:PEG), a $40.5 billion utility company with a 3.1% dividend yield, from Buy to Buy on Monday, while raising its price target to $97.00 from $86.00. According to InvestingPro, analyst targets for PEG currently range from $70 to $100.

The upgrade reflects UBS’s confidence in PEG’s consistent utility performance and potential to unlock additional value through nuclear contracts. UBS analyst Ross Fowler noted that PEG can achieve 6.5-7.0% EPS growth without issuing equity in its five-year plan. The company has maintained dividend payments for 55 consecutive years, with 13 straight years of dividend increases, demonstrating remarkable financial stability.

UBS estimates approximately $7 per share in value from a nuclear power purchase agreement (PPA) for one-third of PEG’s output at around $84 per megawatt hour, consistent with recent deals. The firm suggests full contracting value could exceed $20 per share.

The analysis indicates that including the PPA upside implies $4.20 of 2027 EPS at the current multiple, which is 9% below UBS’s forecast. This valuation approach follows similar patterns seen with other nuclear asset operators.

While acknowledging investor concerns about policy uncertainty in New Jersey and contract timing, UBS believes PEG’s baseload nuclear assets will ultimately deliver value to shareholders, similar to what has been observed with CEG and TLN.

In other recent news, Public Service Enterprise Group Inc (PSEG) reported first-quarter 2025 earnings that exceeded analysts’ expectations, with an earnings per share (EPS) of $1.43 compared to the forecast of $1.40. The company also surpassed revenue projections, reporting $3.22 billion against the anticipated $3.11 billion. Despite these positive financial results, the company’s stock experienced a decline in pre-market trading. PSEG continues to invest heavily in its regulated capital investment plan and has reaffirmed its full-year earnings guidance for 2025. In terms of liquidity, PSEG has significantly increased its available funds to $4.6 billion, up from $2.6 billion at the end of 2024. The company has also been active in the bond market, issuing $1.9 billion in long-term debt to improve its liquidity position further. Additionally, PSEG’s ongoing efforts to address energy affordability challenges in New Jersey have been highlighted, with the company working closely with state policymakers to develop solutions. The company is also exploring new opportunities in regulated generation, considering potential legislative changes that could impact its operations.

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