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Is Xcel Energy Attractive despite Its Muted Price Targets?

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Dec. 4 2020, Updated 10:53 a.m. ET

Xcel Energy: Price targets

According to Wall Street analysts, Xcel Energy (XEL) has an expected upside of nearly 3% in the next year. It has a price target of $44.42, compared to its current market price of $43.16 on August 3, 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 August 3, 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. Xcel’s large-cap peer Southern Company (SO) is expected to have a flattish next year with a price target of $53.44. It is currently trading at $53.00.

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Xcel Energy: Summing it up

Xcel Energy expects its earnings to grow by 4%–6% in the next five years. It is planning to generate nearly 75% of total revenue through multiyear rate plans, which could effectively reduce the regulatory lag. Its return on equity is expected to increase by 50 basis points by 2018 if the regulatory lag is addressed.

Xcel’s operating and maintenance expenses are forecasted to increase by a mere 0%–2% in the coming quarters in 2016, which could have a positive impact on its earnings.

Xcel Energy’s dividends are expected largely to follow its earnings growth. It increased its annual dividend by 6.2% in 2016 compared to 2015.

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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