UPDATE: Credit Suisse Downgrades Pepco Holdings to Underperform on Slow Improvement Progress

In a report published Wednesday, Credit Suisse analyst Dan Eggers downgraded the rating on Pepco Holdings POM from Neutral to Underperform, but slightly raised the price target from $20.50 to $21.00. In the report, Eggers noted, “We remain optimistic POM can work with all their regulators to improve future rate case outcomes, but at current prices the company would need to see distribution ROEs improve by 110-190 bp to bring the stock to a group multiple. Given the slow progress to improvement and less aggressive mechanisms proposed in the 6 rate cases for 2013, we think a fix will take longer, leaving the stock too expensive to keep up with peers. We appreciate the draw of the 5% yield (which we think is safe) but don't believe this is enough. We are lowering POM to Underperform (from Neutral) with a $21.00 target (from $20.50). We are lowering our '13-'15 ests to $1.09, $1.24 and $1.30 (from $1.17, $1.26 and $1.32) to reflect POM's updated capex program, rate base estimates and 4Q12 depreciation expense.” Pepco Holdings closed on Tuesday at $21.77.