On Friday, JPMorgan adjusted its stance on CenterPoint Energy (NYSE:CNP), downgrading the stock from Overweight to Neutral and lowering the price target to $29.00 from $32.00.
The firm cited significant challenges following the company's handling of Hurricane Beryl. The energy company faced criticism for its response to the hurricane, which included prolonged outages and communication issues, leading to backlash from Texas politicians and regulators.
The situation escalated with CenterPoint Energy's unexpected withdrawal of its CEHE rate case application, a move that came amid heightened scrutiny from the state.
This withdrawal and the broader discourse in Texas regarding potential penalties have created a substantial overhang, contributing to the stock's continued underperformance. JPMorgan expressed concern that the market's worries about potential adverse scenarios may persist until there is more clarity on several fronts.
The firm noted that the lack of clear direction on how CenterPoint will address the storm's aftermath, align with the governor's plan, find a new course for the rate case, manage storm cost recovery, and respond to any legislative changes or other impacts to the utility sector are all contributing to the uncertainty. Financial concerns about the potential effects on credit metrics further exacerbate the situation.
Despite these challenges, JPMorgan acknowledged that CenterPoint Energy might still benefit from the robust economic growth in Houston and new rates in other service territories.
However, the firm concluded that the stock's previous premium is no longer warranted and anticipates a more extended period before the company can regain the confidence of all stakeholders.
In other recent news, CenterPoint Energy has been the subject of several analyst adjustments. JPMorgan downgraded the company from Overweight to Neutral citing challenges following the company's response to Hurricane Beryl and the unexpected withdrawal of its CEHE rate case application.
Similarly, KeyBanc Capital Markets revised its rating from "Overweight" to "Sector Weight" due to the company's decision to withdraw its Houston Electric rate case, introducing regulatory uncertainty.
BMO Capital also downgraded CenterPoint Energy from "Outperform" to "Market Perform" and reduced its price target to $28 following the company's withdrawal of its base rate case and the System Resiliency Plan from the Public Utility Commission of Texas' review.
Despite these downgrades, CenterPoint Energy reported a steady financial performance for the second quarter of 2024, matching earnings per share expectations and reaffirming its full-year 2024 non-GAAP EPS guidance range at $1.61 to $1.63.
The company also made progress in its regulatory approvals and settlement discussions, receiving approval for their final settlement in Texas Gas jurisdictions.
In addition to these developments, CenterPoint Energy is managing the aftermath of Hurricane Beryl, has invested $800 million in capital expenditures in the second quarter, and is progressing with the sale of their Louisiana and Mississippi gas LDCs, expected to close in the first quarter of 2025. These recent developments continue to shape CenterPoint Energy's regulatory and financial future.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.