TXNM Energy (NYSE: TXNM), an electric utility serving New Mexico and Texas, has received a Buy rating from Jefferies, accompanied by a price target of $50.
The new coverage comes after TXNM Energy's unsuccessful merger attempt with Avangrid (NYSE:AGR).
Jefferies cited TXNM Energy's growth potential in its infrastructure as a key factor for the positive outlook. Despite acknowledging the company's weak balance sheet and the unique regulatory challenges it faces, the firm finds the utility's stock appealing. This is particularly due to its 14% discount compared to peers when considering projected earnings for 2027.
The investment firm pointed out that the current valuation of TXNM Energy is compelling, especially when looking at the long-term growth opportunities. They believe that the company's capital expenditure (capex) has the potential for upside, and advancements in rate cases could act as positive catalysts for the stock.
The analyst from Jefferies highlighted the importance of the utility's standalone infrastructure growth story, suggesting it has considerable merit post the failed merger. The firm's price target reflects a confidence in TXNM Energy's future performance and its ability to navigate through the mentioned financial and regulatory issues.
In other recent news, TXNM Energy, formerly PNM Resources, has reported its second quarter 2024 earnings per share at $0.60 and confirmed its guidance range of $2.65 to $2.75 per share for the year.
The company also announced a robust infrastructure investment plan in Texas and New Mexico, with a resiliency plan estimated at $600 million. On the personnel front, TXNM Energy has seen changes in the compensation arrangements for its top executives, Joseph D. Tarry and Elisabeth A. Eden, and the appointment of Brian G. Iverson as the new General Counsel.
The company also declared a regular quarterly dividend of $0.3875 per share, continuing its practice of rewarding shareholders. In addition to these developments, the company announced the upcoming retirement of its Senior Vice President and Chief Financial Officer, Ms. Elisabeth A. Eden, expected no sooner than March 15, 2025. The company has begun the search for a new CFO to ensure a smooth transition.
InvestingPro Insights
TXNM Energy's recent Buy rating from Jefferies aligns with several key metrics and insights from InvestingPro. The company's market cap stands at $3.98 billion, with a P/E ratio of 47.01, reflecting the market's optimistic growth expectations that Jefferies highlighted.
InvestingPro Tips reveal that TXNM has raised its dividend for 13 consecutive years, demonstrating a commitment to shareholder returns despite the challenges mentioned in the article. This consistent dividend growth, coupled with a current dividend yield of 3.51%, may appeal to income-focused investors.
The company's revenue for the last twelve months as of Q2 2024 was $1.84 billion, with a gross profit margin of 53.09%. These figures suggest a solid financial foundation, supporting Jefferies' view on TXNM's growth potential.
It's worth noting that TXNM is trading near its 52-week high, with a strong return of 22.99% over the last three months. This recent performance could be indicative of growing investor confidence in the company's standalone strategy following the failed merger.
For readers interested in a more comprehensive analysis, InvestingPro offers 15 additional tips for TXNM Energy, providing a deeper understanding of the company's financial health and market position.
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