On Thursday, BofA Securities updated its outlook on Public Service Enterprise Group Inc. (NYSE:PEG) shares, increasing the price target to $80 from the previous $73 while retaining a Buy rating on the stock.
The firm's analysis suggests a potential increase in earnings per share (EPS) for PSEG, driven by strategic initiatives and favorable regulatory conditions.
The analyst from BofA Securities highlighted the anticipated EPS growth for the New Jersey-based utility, citing a possible $0.31 boost by 2027.
This increase is expected to result from the development of a data center campus or a similar project in New Jersey. Additionally, the EPS could see a further increment of $0.16 in 2028 linked to the Pennsylvania nuclear units.
The positive outlook is partly based on the assumption that PSEG could mirror the financial outcomes of the Talen/AWS agreement, which was announced earlier in the year. If PSEG manages to achieve similar economics, the total EPS upside could be roughly $0.70 compared to current estimates.
At the subsidiary level, PSEG's regulated utility, PSE&G, has seen an adjustment in its return on equity (ROE) assumptions. This change reflects the ongoing rate case with the New Jersey Board of Public Utilities (BPU).
BofA Securities recognizes the stable regulatory environment in New Jersey, the utility's commendable performance with an above-average growth rate of approximately 7%, and the absence of a need for equity to maintain its targeted funds from operations (FFO) to debt ratio in the mid-teens throughout the planning period.
The updated price target and sustained Buy rating by BofA Securities indicate confidence in Public Service Enterprise Group's future financial performance and strategic positioning within the energy sector.
InvestingPro Insights
As Public Service Enterprise Group Inc. (NYSE:PEG) garners a favorable outlook from BofA Securities, real-time data and metrics from InvestingPro provide additional context for investors. The company's Market Cap stands at a robust $37.29B, reflecting its significant presence in the utility sector. With a P/E Ratio of 20.57, PSEG is trading at a multiple that suggests investors have optimistic expectations for its earnings growth relative to its peers. Moreover, the company's dividend yield of 3.21% is attractive, especially in light of its history of dividend reliability, as evidenced by its track record of raising dividends for 12 consecutive years—an InvestingPro Tip worth noting for income-focused investors.
Another InvestingPro Tip indicates that three analysts have revised their earnings expectations downwards for the upcoming period. This contrasts with BofA Securities' view but is an essential factor for investors to consider as they assess the company's future earnings potential. For those interested in further insights, there are additional InvestingPro Tips available, providing a more comprehensive analysis of PSEG's financial health and market position.
To deepen your understanding of Public Service Enterprise Group's investment profile and access exclusive tips, consider subscribing to InvestingPro. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and unlock the full breadth of expert analysis and data-driven insights.
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