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DTE Energy Hits 52-Week High on Efficient Capital Allocation - Analyst Blog

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Shares of DTE Energy Company ( DTE ) hit a new 52-week high of $90.98 on Jan 21, eventually closing at $90.87. The company has delivered a return of about 38% in the past one year, outperforming the S&P return of 10.5%. The utility company has a market cap of $16.08 billion and has a long-term estimated earnings per share growth rate of 6.23%.

Behind the Rise

DTE Energy is focused on improving its cost structure while directing capital investments towards renewable generation, utility infrastructure and environmental compliance assets. This will help the utility attain a 5-6% long-term EPS growth target. Additionally, the company plans to maintain a dividend payout goal of 60-70%.

The company's service territory, the state of Michigan has witnessed a gradual economic recovery due to progress in the employment rate, housing and auto markets. These positives will likely boost future utility demand in the state.

A DTE Energy unit, DTE Electric Company, has filed a rate-hike appeal to the Michigan Public Service Commission last month. The incremental rate will be applicable for residential electric customers. If approved, this will be the first electricity rate increase for residential customers in the last four years.

The purpose of the latest rate-hike appeal is to recoup around $3.5 billion invested by DTE Electric over the last four years in infrastructure development projects. The capital outlay was mainly for achieving regulatory compliance at its power generation facilities.

Upon approval, residential consumers will have to pay an additional $3.25 every month for electricity, reflecting an annual increase of around 1.5% since 2013. DTE Electric will recover $0.37 billion through this rate hike.

Earlier this month, DTE Energy announced that it has undertaken additional initiatives for enhancing agricultural energy efficiency under its "Energy Efficiency Program for Business." With 20 new measures in place, agricultural community members in Michigan can apply for cash incentives to help them reimburse the cost incurred for equipment upgrades. The company has stepped forward to help the agricultural community to save energy and benefit from monetary relief as they form the backbone of Michigan's economy.

DTE Energy is also diversifying its generation portfolio by investing in renewable energy given the increasing pro-environment stance in the U.S. The company plans to invest a total of $400 million between 2014 and 2018 under renewable capital investments, including projected investment of $0.24 billion for its two wind parks. These initiatives will take DTE Energy a step closer to meeting its own and Michigan's renewable goal of 10% by 2015.

DTE Energy reported positive earnings surprises in two of the past four quarters, delivering an average beat of 2.67%.

Zacks Rank

DTE Energy holds a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include Huaneng Power International, Inc. ( HNP ), Northeast Utilities ( NU ) and CMS Energy Corp. ( CMS ). Huaneng Power and Northeast Utilities carry a Zacks Rank #1 (Strong Buy), while CMS Energy holds a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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