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BofA Securities updated its outlook on Public Service Enterprise Group Inc. (NYSE:PEG), raising the price target to $97.00 from $88.00 while maintaining a Buy rating on the stock. The firm's analyst cited the recent settlement agreement in the general rate case (GRC) with the New Jersey Board of Public Utilities (BPU) as a key factor for the increased optimism.
The analyst noted the agreement's 9.6% return on equity (ROE) and the improved equity to total capital structure, now at 55%, which aligns with expectations and reflects a 100 basis points improvement from the previous outcome. The settlement is now pending consideration by BPU commissioners in an open meeting scheduled on October 9.
The analyst expressed confidence in the stability of New Jersey's regulatory environment for utilities, which is seen as beneficial for Public Service Enterprise Group. The terms of the settlement, according to the analyst, are consistent with other recent rate case outcomes in the state.
The Administrative Law Judge (ALJ) recommended approval of the settlement on October 4, which has reduced concerns about potential revisions by the BPU, as per the analyst's remarks. This endorsement by the ALJ is seen as a positive sign for the settlement's approval in the upcoming BPU meeting.
Public Service Enterprise Group (PSEG) witnessed a series of notable developments. Evercore ISI raised PSEG's stock target to $95, while Ladenburg Thalmann upgraded the stock to 'Buy', raising their 2026 and 2027 earnings per share estimates for PSEG to $4.55 and $4.82, respectively. Simultaneously, Jefferies initiated coverage on PSEG with a Hold rating and a price target of $85.00, and JPMorgan reduced its price target to $102.
These revisions follow PSEG's reported decrease in net income for the second quarter of 2024, with earnings falling to $0.87 per share from $1.18 per share in the same quarter of the previous year. However, the company maintains its full-year expectations, anticipating an increase in gross margin in the fourth quarter.
PSEG is actively supporting New Jersey's economic development through the expansion of data centers and the state's clean energy initiatives. The company's service territory seems to be attracting interest for new ventures, which could lead to further capacity expansion, particularly in nuclear power.
InvestingPro Insights
Recent data from InvestingPro adds context to BofA Securities' optimistic outlook on Public Service Enterprise Group Inc. (NYSE:PEG). The company's market cap stands at $44.82 billion, reflecting its significant presence in the utility sector. PEG's P/E ratio of 27.26 suggests investors are willing to pay a premium for its earnings, possibly due to the stability mentioned in the analyst's report.
InvestingPro Tips highlight PEG's strong dividend history, having maintained dividend payments for 54 consecutive years and raised them for 12 years straight. This aligns with the analyst's view on the company's stability and regulatory environment. The stock's recent performance has been notably strong, with a 62.4% total return over the past year and trading near its 52-week high, which supports the increased price target.
For investors seeking more comprehensive analysis, InvestingPro offers 12 additional tips for PEG, providing deeper insights into the company's financial health and market position.
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