On Monday, BMO Capital adjusted its stock price target for Entergy Corp (NYSE: ETR), a major utility company, reducing it to $159 from $166. Despite the decrease in the price target, BMO Capital maintains an Outperform rating on the stock.
The revision follows Entergy's recent third-quarter earnings call and the examination of materials presented at the Edison Electric Institute (EEI) conference. BMO Capital's updated financial model reflects new information disclosed by the company, which has led to a recalibration of expectations.
Entergy's updated earnings per share (EPS) outlook, which was shared during the quarterly call, suggests a midpoint that BMO Capital's estimates are now closely aligned with. According to the firm's analysis, this updated EPS forecast indicates approximately a 9% growth from the original $6.70 EPS midpoint projected for the year 2023.
The decision to adjust the price target to $159 is a result of a "mark to market" on BMO Capital's sum-of-the-parts (SOTP) valuation. This process involves updating the valuation to reflect current market conditions. Moreover, the firm has normalized the premiums it had previously assigned to Entergy's stock, which were elevated due to the company's perceived increased growth potential prior to the latest estimate revisions.
BMO Capital's commentary on the adjustment emphasizes the firm's continued confidence in Entergy's performance, sustaining the Outperform rating despite the moderated price target. The analyst's statement suggests a belief in the company's growth trajectory, albeit at a recalibrated pace in line with new company disclosures and market conditions.
In other recent news, Entergy Corporation (NYSE:ETR) has been the subject of several significant developments. BofA Securities recently downgraded Entergy's stock to Neutral from Buy, but simultaneously raised the price target from $138 to $154. This decision followed the company's third-quarter earnings announcement and a detailed update to its strategic business plan.
Entergy's revised business plan includes a 21% increase in capital spending, higher earnings per share (EPS) guidance, and an elevated EPS growth rate of 8%-9% from 2026 to 2028.
The company also revealed plans for constructing new combined cycle units, a 500kV transmission line, a substation, and system upgrades, following an agreement with a major customer in Louisiana. Moreover, Entergy is exploring the development of nuclear units and has announced a stock split slated for early December.
In the third quarter, Entergy reported robust financial results, with an adjusted EPS of $2.99, leading to an upward revision of the lower end of the company's guidance range. The company also plans to accelerate its capital investment plan, with an additional $7 billion targeted toward renewable energy and transmission projects.
Entergy anticipates an industrial sales growth rate of 11% to 12% through 2028, driven by a new customer in Louisiana. These are some of the recent developments in the company's operations.
InvestingPro Insights
Entergy Corp's financial metrics and recent performance align with BMO Capital's Outperform rating, despite the lowered price target. InvestingPro data shows that Entergy has a P/E ratio of 14.88 (adjusted for the last twelve months as of Q3 2024), indicating a relatively reasonable valuation compared to the sector average. This metric supports BMO Capital's positive outlook on the stock.
Two key InvestingPro Tips further reinforce the analyst's perspective:
1. Entergy has raised its dividend for 10 consecutive years, demonstrating a commitment to shareholder returns that aligns with utility sector expectations.
2. The company has shown a strong return over the last three months, with InvestingPro data revealing a 27.83% price total return over this period.
These insights suggest that Entergy's financial health and market performance remain robust, potentially justifying BMO Capital's maintained Outperform rating despite the adjusted price target. Investors seeking more comprehensive analysis can access 11 additional InvestingPro Tips for Entergy, providing a deeper understanding of the company's financial position and market dynamics.
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