On Thursday, Jefferies initiated coverage on Dominion Resources, Inc. (NYSE:D), assigning a Hold rating to the utility company's stock, accompanied by a price target of $58.00. The new target reflects the firm's assessment of Dominion's earnings potential and market position.
The report highlighted that Dominion Energy has set a more achievable 5-7% earnings per share (EPS) compound annual growth rate (CAGR) following its 2024 Business Review.
This reset in growth rate comes after the stock was previously deemed overvalued, with anticipated downside risks to its fourth quarter of 2022 through the first quarter of 2024 earnings. However, the current consensus estimates are now viewed as reasonable.
Dominion Energy's stock is trading at a peer average price-to-earnings (P/E) ratio. The firm suggests that a discount might be more suitable due to the company's mix of non-utility businesses and the construction of offshore wind projects, which add complexity and risk to the company's portfolio.
Looking forward, Jefferies forecasts a 5.7% EPS CAGR for Dominion Energy from 2025 to 2028. The firm also notes the merchant nuclear Millstone contracting as a potential upside lever for the company's earnings growth. This aspect could contribute positively to Dominion's financial performance in the coming years.
The coverage initiation and the setting of the price target come as Dominion Energy continues to navigate a transitional energy market, balancing traditional utility operations with investments in renewable energy infrastructure.
In other recent news, Dominion Energy and Lion Electric have made significant strides in their respective sectors. Dominion Energy's Q2 earnings per share (EPS) of $0.65 surpassed BMO Capital's and consensus estimates of $0.57, leading BMO Capital Markets to raise its price target on Dominion from $53 to $57, while maintaining a Market Perform rating.
Also, the Nuclear Regulatory Commission (NRC) extended the operating licenses of the North Anna Power Station's two nuclear reactors, allowing them to continue operations until 2058 and 2060.
Dominion Energy and its subsidiary, Virginia Electric and Power Co, secured offshore wind leases in a recent U.S. government auction. The company also issued $1.2 billion in senior notes, a transaction expected to be used for general corporate purposes. Dominion Energy expanded its offshore wind capacity with a new lease, acquiring the rights to a 176,505-acre lease area off the coast of Virginia Beach.
On the other hand, Lion Electric's electric school buses have joined Dominion Energy's Electric School Bus Infrastructure program in Virginia. This initiative supports the transition to electric school bus fleets within the state's public school districts.
The collaboration between Lion Electric and Dominion Energy complements the federal EPA's Clean School Bus Program, which is expected to allocate $5 billion over five years to boost the adoption of electric school buses nationwide.
InvestingPro Insights
As Dominion Resources, Inc. (NYSE:D) adapts to the evolving energy market, current InvestingPro data reveals a nuanced financial landscape. The company has a market capitalization of $48.24 billion, and with a price-to-earnings (P/E) ratio of 30.49, it aligns with the Jefferies' assessment of the stock trading at a peer average. This valuation is further supported by a consistent shareholder commitment, as evidenced by Dominion's impressive track record of maintaining dividend payments for 42 consecutive years, offering a substantial dividend yield of 4.65%.
InvestingPro Tips highlight Dominion's significant debt burden, which investors should consider when evaluating the company's financial health. Meanwhile, the company's stock has shown resilience with low price volatility, and it is trading near its 52-week high, indicating a strong performance in the recent past with a 17.57% return over the last three months. These factors, combined with a 5.7% EPS CAGR forecasted by Jefferies from 2025 to 2028, suggest a stable outlook for the company.
The insights provided here are just a glimpse of what's available. For a deeper dive into Dominion Resources, Inc.'s financials and for additional InvestingPro Tips, interested readers can visit https://www.investing.com/pro/D. There, more than four additional tips await to guide potential investment decisions.
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