We maintain our Neutral recommendation on DTEEnergy Company ( DTE ).
DTE Energy's regulated electric and gas utilities in Michigan
generate a relatively stable and growing earnings stream. We also
believe that a constructive regulatory environment in Michigan will
aid in earnings growth.
Going forward, we believe that infrastructure improvement
capital programs, the outcome of future regulatory proceedings,
investment returns and changes in discount rate assumptions in
benefit plans and health care costs would also boost earnings.
DTE Energy focuses on improving its cost structure and directing
capital investments toward renewable generation, utility
infrastructure and environmental compliance assets. We believe that
a focus on its cost structure and operational improvements will
help the utility attain a 5%-6% long-term EPS growth target and
shareholder return in the range of 9%-10%. Moreover, improvement in
the cost structure will also come in good stead as it will reduce
the hike in customer bills.
Overall, we expect the growth momentum to be maintained by
beneficial regulatory policies in Michigan, higher authorized rates
for its regulated business, growth opportunities in its unregulated
businesses and an industry-high dividend yield. The company's plans
to monetize its Barnett Shale assets and other properties would
alleviate the need for external borrowings.
However, we prefer to remain on the sidelines due to the present
unfavorable macro backdrop, lower demand for electricity, and the
dismal economy in Michigan. The company presently retains a
short-term Zacks #3 Rank (Hold) that corresponds with our long-term
Neutral recommendation on the stock.
Detroit, Michigan-based DTE Energy Company is a holding company
with subsidiaries engaged in regulated and unregulated energy
businesses. Detroit Edison Company and Michigan Consolidated Gas
Company are its largest regulated subsidiaries. DTE Energy also has
four non-utility segments engaged in a variety of energy-related
business. DTE Energy's unregulated businesses include gas pipelines
and storage, unconventional gas exploration, development and
production; power and industrial projects and coal transportation
and marketing, and energy marketing and trading operations.
Some of its main competitors are CMS Energy
Corp. ( CMS ) and Wisconsin Energy
Corp. ( WEC ).
CMS ENERGY (CMS): Free Stock Analysis Report
DTE ENERGY CO (DTE): Free Stock Analysis Report
WISC ENERGY CP (WEC): Free Stock Analysis
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