Risk, Reward Balanced at DTE Energy - Analyst Blog

On April 3, we have issued an updated research report on DTE Energy Company DTE. The U.S. utility firm continues with its strategic investments towards utility infrastructure and renewable assets. However, we are concerned about stringent government regulations and price volatilities, which may challenge the company's future performance.

DTE Energy, a Zacks Rank #2 (Buy) stock, reported stable result in fourth-quarter 2013. Both earnings as well as revenues surpassed the Zacks Consensus Estimate. On a year-over-year basis, both top and bottom line improved primarily on the back of higher weather-related sales.

We appreciate DTE Energy's steady effort towards improvement of the electricity and gas infrastructure in terms of meter relocations and upgrading of distribution assets. These initiatives will enable the company to provide reliable services to its customers.

In addition to improving utility asset-base, DTE Energy is also expanding its renewable energy portfolio. The company plans to invest $240 million in 2014 for its two wind parks. These projects will help the company to achieve the state of Michigan's renewable goal of 10% by 2015.

DTE Energy continues to have a stable liquidity position, including cash balance of $52 million as of Dec 31, 2013 and available fund of $1,600 million under its credit facilities. A favorable financial profile enables the company to upgrade its existing operations besides expanding renewable operations.

The company has a regular dividend payment history. In 2013, the company distributed $445 million as cash dividend. This practice will help the company to retain investors' attention on the stock.

On the flip side, DTE Energy's operations are subject to the federal, state, and local legislative requirements, primarily related to the emission of greenhouse gas and carbon dioxide. Changes in environmental regulations could impact the company's financial results.

Key Picks from the Sector

Some other stocks looking equally good in the utilities industry include Black Hills Corporation BKH, Otter Tail Corporation OTTR and Public Service Enterprise Group Inc. PEG, each carrying a Zacks Rank #1 (Strong Buy).