Argus has made a bullish move on Xcel Energy (NASDAQ: NASDAQ:XEL), upgrading the stock from Hold to Buy and setting a price target of $68.00.
The firm cites the stock's favorable trading position compared to its peers on key valuation metrics as a reason for the upgrade, suggesting an attractive entry point for investors.
Xcel Energy, a utility company with operations across eight Western and Midwestern states, has been recognized for its significant role in transmitting nuclear-generated electricity and its progressive use of renewables.
Despite facing challenging weather conditions in 2023, which led to lower gas demand for heating and coincided with relatively low gas prices, the company managed to control generating costs, and a return to normal weather patterns is anticipated to contribute to earnings growth in the second half of 2024 and the first half of 2025.
The analyst also noted the potential cost savings and favorable regulatory outcomes associated with Xcel Energy's clean nuclear generation. Furthermore, an improving economy is expected to bolster the company, with projections indicating increased data center demand in the region by 2028.
Xcel Energy's focus for 2024 is on capital investment, with the expected return on these investments driving earnings growth.
Xcel Energy's strategic commitment to expanding electric and gas services within its regulated territories is highlighted as a key factor in its long-term growth prospects.
Although these projects will unfold over an extended period, they are expected to immediately impact the base rate, preparing the company for the forecasted surge in data center demand.
In other recent news, Xcel Energy has been the subject of attention from financial analysts and has reported significant developments in its operations. KeyBanc maintained its Overweight rating and $65.00 price target for Xcel Energy, citing the company's growth strategies which include data center expansion, industrial electrification, and regional economic development. The firm also noted Xcel Energy's commitment to decarbonization and wildfire risk mitigation.
Goldman Sachs, on the other hand, increased its price target for Xcel Energy to $73, highlighting the company's anticipated 9% rate base growth and projected 8% earnings growth through 2027.
In its recent earnings call, Xcel Energy reaffirmed its 2024 earnings guidance and emphasized its commitment to investing in resilient infrastructure and clean energy. The company reported an earnings per share of $0.54 and a $1.7 billion investment in energy infrastructure. Xcel Energy also outlined its ongoing management of the Smokehouse Creek wildfire aftermath, having settled 43 out of 141 claims, and its long-term earnings growth objective of 5% to 7% with growth above 7% expected from 2025.
Lastly, the Texas Commission approved a $13 million distribution rider request, which is expected to reduce the need for future rate cases.
InvestingPro Insights
Following the upgrade by Argus, a closer look at Xcel Energy's financial health through InvestingPro's real-time data shows a company with a solid market capitalization of $33.52 billion and a P/E ratio of 17.97, indicating investor confidence in its earnings potential. The adjusted P/E ratio for the last twelve months as of Q2 2024 stands at 16.73, which, when coupled with a PEG ratio of 2.83, suggests that the company's earnings growth may not be keeping pace with its share price. Additionally, Xcel Energy's commitment to shareholder returns is evident in its dividend track record, boasting a dividend yield of 3.64% and a history of raising its dividend for 20 consecutive years, a testament to its financial stability and a potential draw for income-focused investors.
InvestingPro Tips highlight that Xcel Energy has maintained dividend payments for 53 consecutive years and analysts have revised their earnings upwards for the upcoming period, signaling positive sentiment regarding the company's future performance. These insights, along with the fact that the company has been profitable over the last twelve months, provide a comprehensive view of Xcel Energy's financial strength. For investors seeking more in-depth analysis, InvestingPro offers additional tips on Xcel Energy's financial health and future prospects at https://www.investing.com/pro/XEL.
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