On Tuesday, Guggenheim maintained a Buy rating on shares of CenterPoint Energy (NYSE:CNP), while reducing the price target to $32.00 from the previous $33.00. The adjustment comes after CenterPoint reported fourth-quarter earnings for 2023 that aligned with both Guggenheim's estimates and the broader consensus. Additionally, the company confirmed its guidance for 2024.
The firm noted that CenterPoint has increased its capital expenditure forecast by $600 million and has reiterated long-term growth rates, aiming for 8% in 2024 and remaining in the upper half of the 6-8% range through 2030. In a concurrent announcement, CenterPoint revealed the sale of its Louisiana and Mississippi local distribution companies (LDC), which matched the projections set in Guggenheim's 2024 Outlook. The sale's terms were noted to have a higher price-to-earnings ratio, a lower enterprise value to rate base, and net proceeds that were as expected.
CenterPoint has already begun reinvesting the anticipated proceeds from the sale into its core jurisdictions, surpassing the capital expenditure guidance for 2023. The company also anticipates further capital expenditure opportunities or reinvestments in areas with fewer regulatory delays. This suggests that the transaction is expected to be neutral to accretive to earnings per share.
Furthermore, CenterPoint has extended the timeline for its $250 million at-the-market (ATM) equity program beyond 2024, indicating that it will be an ongoing requirement. This equity is intended to support an ever-increasing capital expenditure plan, which includes upcoming resiliency plan filings and a comprehensive update to the capital expenditure plan. This update is expected after regulatory proceedings are completed in Texas, Indiana, and Minnesota, with management committing to provide interim updates.
Despite potential headwinds from cash taxes and the impact of equity issuances, the firm emphasized CenterPoint's industry-leading rate base trajectory, which is expected to reach $41 billion by 2030, representing more than 9% growth from 2023 levels. This robust growth underpins management's confidence in achieving the higher end of the long-term earnings per share growth rate. Guggenheim's reiterated Buy rating reflects this positive outlook, despite the slight reduction in the price target to $32.00.
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