On Monday, Goldman Sachs (NYSE:GS) updated its outlook on Xcel Energy (NASDAQ:XEL), raising the stock's price target from $77.00 to $78.00 while maintaining a Buy rating. The adjustment follows Xcel Energy's recent announcement of increased load growth expectations and an expanded capital investment plan.
The company has revised its load growth forecast from 2-3% to 5% and increased its five-year capital plan by $6 billion. Moreover, Xcel Energy has improved its long-term earnings growth guidance from 5-7% to 6-8%. These developments are seen favorably by the analyst, who believes they underscore the investment opportunities arising from the Future of Utilities Capex.
Factors such as power demand growth, the energy transition, and the need to enhance grid reliability are expected to drive higher investment and earnings growth for utilities like Xcel Energy.
Today, shares of Xcel Energy saw a significant uptick, closing approximately 6% higher. The analyst notes that there could be further upside to the company's plan, with management identifying potential upside capital expenditure projects worth $10 billion. Despite the current discounted valuation of Xcel Energy's stock, which the analyst attributes to concerns over wildfire risk, the firm's fundamental outlook is regarded optimistically.
The report concludes with a positive view on the investment opportunity presented by Xcel Energy's shares. The analyst suggests that the new price target implies a total return of around 20%, making it an attractive entry point for investors.
In other recent news, Xcel Energy has been making headlines with its recent financial performance and strategic advancements. Following the company's latest earnings report, Jefferies upgraded Xcel Energy to Buy from Hold and raised the price target to $76.
This decision was influenced by the company's increased earnings per share (EPS) compound annual growth rate (CAGR) guidance from 5-7% to 6-8%, reflecting growing confidence in the company's future performance.
In terms of earnings, Xcel Energy reported an increase in ongoing earnings per share from $1.23 to $1.25 in the third quarter of 2024, despite a $35 million charge related to a 2011 outage. The company also confirmed its 2024 earnings guidance of $3.50 to $3.60 per share and introduced a 2025 earnings guidance of $3.75 to $3.85 per share.
On the infrastructure front, Xcel Energy announced a five-year capital investment plan of $45 billion, primarily targeting clean energy and customer electrification. In addition, the company is set to file a Minnesota Electric Rate Case in November 2024, seeking a $490 million rate increase.
In terms of recent developments, Xcel Energy has settled a significant number of wildfire claims and is managing increased Operations & Maintenance expenses. Analysts at Jefferies highlighted Xcel Energy's proactive advancements in wildfire mitigation and de-risking initiatives, which are being pursued more aggressively than before.
Finally, CEO Bob Frenzel and CFO Brian Van Abel have expressed confidence in the company's wildfire management strategies and outlined the financing strategy for the capital expenditure forecast, emphasizing the importance of maintaining strong credit ratings. These developments highlight Xcel Energy's ongoing commitment to clean energy and infrastructure investment.
InvestingPro Insights
Xcel Energy's recent strategic updates align well with several InvestingPro metrics and tips. The company's market cap stands at $38.3 billion, reflecting its significant presence in the utility sector. An InvestingPro Tip highlights that Xcel Energy has raised its dividend for 20 consecutive years, underscoring its commitment to shareholder returns. This is particularly relevant given the company's improved long-term earnings growth guidance.
The stock's P/E ratio of 19.81 and its trading near its 52-week high, as noted by another InvestingPro Tip, suggest investor confidence in Xcel Energy's growth prospects. This aligns with Goldman Sachs' optimistic outlook and increased price target. Moreover, the company's profitability over the last twelve months and analysts' predictions of continued profitability this year support the positive fundamental outlook mentioned in the article.
For investors seeking more comprehensive analysis, InvestingPro offers 6 additional tips that could provide further insights into Xcel Energy's financial health and market position.
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