Mizuho has maintained its Outperform rating on DTE Energy (NYSE: NYSE:DTE) and raised its price target to $133 from $121.
The adjustment follows a recent Proposal for Decision (PFD) in DTE's Natural Gas rate case in Michigan.
The PFD recommended a return on equity (ROE) of 9.40%, which is lower than the currently authorized 9.90%, and below the 9.80% suggested by Staff.
Following this proposal, shares of Michigan utilities, including CMS Energy (NYSE:CMS) and DTE Energy, experienced a notable decline.
Despite the lower-than-expected recommended ROE in the PFD, Mizuho anticipates the final order, expected in November, to be more favorable for DTE Energy.
The firm suggests that historically, final orders in Michigan have tended to align more closely with Staff recommendations than with the initial PFDs. This expectation contributes to the firm's continued positive outlook on the stock.
The analyst pointed out that the market's reaction to the PFD was swift, with both Michigan utilities' stocks underperforming immediately. However, the belief in a more constructive final order has underpinned the decision to raise the price target for DTE Energy.
In other recent news, DTE Energy has had significant developments. The company reported robust adjusted earnings per share (EPS) of $1.67, marking a 69% year-over-year increase, largely attributed to reduced storm-related costs, new rate implementations, and strong physical gas performance. DTE Energy's Board of Directors declared a dividend of $1.02 per share on its common stock and reported $296 million in operating earnings for the second quarter.
Financial analysts, including KeyBanc, BMO (TSX:BMO) Capital, and BofA Securities, have responded positively to these developments by raising their price targets for DTE Energy shares. BMO Capital, in particular, increased its price target for DTE Energy to $135, maintaining a Market Perform rating, following a recent decision by an administrative law judge (ALJ) regarding DTE Energy's gas case.
Ladenburg Thalmann has also initiated coverage of DTE Energy's stock, assigning a Buy rating and setting a price target of $131. The firm's optimism is based on projections of a robust 7.5% EPS growth through 2027, driven by substantial utility rate base spending and potential legislative changes in Michigan.
InvestingPro Insights
As Mizuho maintains an optimistic stance on DTE Energy with an upgraded price target, a closer look at the company's financial health and market performance through InvestingPro insights can provide investors with a broader context. DTE Energy's market capitalization stands at $25.8 billion, reflecting its substantial presence in the utility sector. Despite a high P/E ratio of 18.57, which indicates a premium relative to near-term earnings growth, the company's history of maintaining dividend payments for 54 consecutive years signals a commitment to shareholder returns, with a current dividend yield of 3.27%.
InvestingPro data also reveals that DTE Energy is trading near its 52-week high, with a price that is 97.67% of the peak, suggesting a strong market confidence in the stock. Moreover, the company has been profitable over the last twelve months, with a gross profit margin of 35.27%, and analysts predict it will remain profitable this year. These financial metrics, along with a low price volatility, contribute to the company's attractiveness to investors seeking stability in their portfolio.
For those looking to delve deeper into DTE Energy's prospects, InvestingPro offers additional insights, including an array of metrics and analytical tools. There are currently more InvestingPro Tips available for DTE Energy, which can be accessed for a comprehensive investment analysis.
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