On Tuesday, Evercore ISI increased the price target for Public Service Enterprise Group Inc. (NYSE:PEG) to $95.00 from the previous target of $92.00, while maintaining an Outperform rating on the stock. The firm has kept its earnings per share (EPS) estimates for the years 2024 through 2026 at $3.65, $4.00, and $4.30, respectively.
The firm believes that Public Service Enterprise Group's growth will be supported by a combination of factors, including Energy Efficiency Investment Initiative (EEII), as well as transmission and distribution investments related to data centers, electric vehicles (EVs), and offshore projects. These factors are expected to contribute to the company's rate base growth, which is projected to be in the upper half of the 6.0-7.5% range.
The revised price target of $95 is based on the 2026 utility EPS projection of $3.88, which is applied to a 15% premium over the peer target multiple of 16.5 times. The firm's analysis also includes a 2026 power/other EBITDA estimate of $875 million, which is applied to a multiple of 16.17 times.
Evercore ISI highlighted that Public Service Enterprise Group's shift to a cleaner energy portfolio following its fossil sale in 2022 is likely to draw more investors. Additionally, the firm anticipates that the stock will gain from increasing investor recognition of the value of nuclear energy, particularly in light of the new nuclear production tax credit that will take effect in January 2024, which is expected to secure the long-term EBITDA and cash flow outlook for the company's nuclear operations.
In other recent news, Public Service Enterprise Group (PSEG) reported a decrease in net income for the second quarter of 2024, with earnings falling to $0.87 per share from $1.18 per share in the same quarter of the previous year. However, the company maintains its full-year expectations, anticipating an increase in gross margin in the fourth quarter.
Ladenburg Thalmann has upgraded PSEG's stock to 'Buy', raising their 2026 and 2027 earnings per share estimates for PSEG to $4.55 and $4.82, respectively, following a significant rise in the Reliability Pricing Model (RPM) price from recent PJM capacity auction results.
Simultaneously, Jefferies initiated coverage on PSEG with a Hold rating and a price target of $85.00, while JPMorgan (NYSE:JPM) reduced its price target to $102 from the previous $911, maintaining an Overweight rating on the stock. These recent developments follow investor meetings in Boston, focusing on PSEG's outlook after the Three Mile Island transaction, and the potential benefits of nuclear power to meet the growing demand from decarbonizing hyperscalers.
Furthermore, PSEG is actively supporting New Jersey's economic development through the expansion of data centers and the state's clean energy initiatives. The company's service territory seems to be attracting interest for new ventures, which could lead to further capacity expansion, particularly in nuclear power. PSEG plans to update its capital plan at the end of the year or the beginning of the next year, remaining confident in meeting its long-term compound annual growth forecast.
InvestingPro Insights
Public Service Enterprise Group's (NYSE:PEG) strong market performance aligns with Evercore ISI's optimistic outlook. According to InvestingPro data, PEG has shown impressive returns, with a 62.4% price total return over the past year and a 50.86% return year-to-date. The stock is currently trading near its 52-week high, with a price that is 97.59% of its highest point in the past year.
InvestingPro Tips highlight PEG's consistent dividend history, having maintained dividend payments for 54 consecutive years and raised them for 12 consecutive years. This track record of reliable dividends supports the company's appeal to investors seeking stable income, especially in light of its current dividend yield of 2.67%.
The company's P/E ratio of 27.26 and Price to Book ratio of 2.83 suggest that investors are pricing in the growth potential mentioned by Evercore ISI, including investments in energy efficiency and infrastructure for emerging technologies like EVs and data centers.
For readers interested in a deeper analysis, InvestingPro offers 12 additional tips for PEG, providing a more comprehensive view of the company's financial health and market position.
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