Xcel Energy’s Challenges, Guidance, and Gloomy Price Targets

Vineet Kulkarni - Author

Aug. 1 2016, Updated 9:04 a.m. ET

Price targets

According to Wall Street analysts, Xcel Energy (XEL) has an expected downside of nearly 1% in the next year. It has a price target of $44.00, compared to its current market price of $44.30 on July 26, 2016.

Of the 17 analysts tracking Xcel Energy, 11 recommend it as a “hold” and four recommend it as a “buy.” Two analysts recommended it as a “sell” on July 26, 2016.

Among its peers, DTE Energy (DTE) has a median price target of $98.50 for the next year. This implies an estimated upside of just 0.4% against its current market price of $98.10.

CMS Energy (CMS) has an estimated downside of more than 2% in the next year. According to analysts, it has a price target of $44 against its current market price of $45.

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Xcel Energy: Outlook

Xcel Energy expects its earnings to grow by 4%–6% annually in the next few years. The earnings growth target is in line with the industry average. According to Xcel’s management, expenses on operations and maintenance are forecasted to increase by a mere 0%–1% in the coming quarters in 2016, which could have a positive impact on its earnings.

Xcel Energy’s return on equity might expand because it’s trying to reduce the regulatory lag associated with rate cases. It has a multiyear rate plan settled from Minnesota for 2016–2018. It is expected that the return on equity can improve by 50 basis points if the regulatory lag is addressed.

Brokers’ price targets for Xcel Energy might not look attractive. However, it looks poised for stable, long-term growth, which improves its standing in the utility space.


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