On Monday, Public Service Enterprise Group Inc. (NYSE:PEG) received an upgrade in its stock rating by Ladenburg Thalmann from Neutral to Buy. Accompanying this positive shift, the firm also increased the price target for PSEG shares to $86.50, up from the previous target of $77.50.
The upgrade comes in the wake of the recent PJM capacity auction results, which saw a significant rise in the Reliability Pricing Model (RPM) price.
This increase, from $54.95 to $269.92, is expected to have a substantial impact on PSEG's earnings. In light of these results, Ladenburg Thalmann has adjusted its earnings estimates for the company.
Analysts at the firm have raised their 2026 earnings per share estimate for PSEG by $0.32 to $4.55, and their 2027 estimate by $0.60 to $4.82. These revised estimates take into account an assumption that auction prices for the 2026-27 planning year will decline to $155 per megawatt-day (MW/day).
The recent auction outcome is significant for PSEG, representing a $10 per megawatt-hour (MWh) price increase. This increase is nearly half of the $25.00 per MWh potential uplift identified in Ladenburg Thalmann's most recent note on the company. The firm's updated stance and price target reflect the anticipated benefits to PSEG's financial performance stemming from the auction results.
In other recent news, Public Service Enterprise Group (PSEG) reported a decrease in net income for the second quarter of 2024, with a decline in earnings to $0.87 per share from $1.18 per share in the same quarter of the previous year. The company's non-GAAP operating earnings also saw a decrease, falling to $0.63 per share from $0.70 per share in 2023.
Despite these results, PSEG maintains its full-year expectations, including a resolution to the distribution rate case and an anticipated increase in gross margin in the fourth quarter.
PSEG is actively supporting New Jersey's economic development, particularly through the expansion of data centers and the state's clean energy initiatives.
The company has reaffirmed its forecast of 5% to 7% annual growth in non-GAAP operating earnings through 2028. PSEG is not planning to build new power plants, instead focusing on clean energy assets and existing infrastructure.
Amidst these developments, PSEG is facing higher operation and maintenance costs and investment-related expenses. However, the company expects growth in rate base from higher regulated investments, and is seeing strong interest in data center projects and electric vehicle charging infrastructure.
PSEG is confident in meeting its long-term compound annual growth forecast and plans to update its capital plan at the end of the year or the beginning of the next year.
InvestingPro Insights
Following the recent upgrade by Ladenburg Thalmann, Public Service Enterprise Group Inc. (NYSE:PEG) shows a promising financial outlook, underpinned by solid InvestingPro Data metrics. The company has a market capitalization of $39.27 billion and a P/E ratio of 23.89, which suggests a robust valuation in the current market. Notably, PSEG's dividend yield stands at 3.04%, which is attractive for income-focused investors, especially considering the company's history of dividend growth, recently reported at 5.26%.
Adding to the positive sentiment, an InvestingPro Tip highlights that PSEG has raised its dividend for 12 consecutive years, demonstrating a strong commitment to returning value to shareholders. Moreover, the stock is trading near its 52-week high, with a price 96.26% of this peak, indicating investor confidence in the company's performance and future prospects.
For readers seeking a deeper analysis and additional insights, InvestingPro offers a wealth of tips, including 7 analysts who have revised their earnings upwards for the upcoming period, pointing to an optimistic outlook on PSEG's financial health. To explore more such insights, visit the dedicated section for PSEG on InvestingPro, which features over 5 additional tips to guide investment decisions.
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