Goldman Sachs’ Michael Lapides believes that near term headwinds could potentially drive modest multiple compression for Portland General Electric Company POR, moving the stock back to its historical discount to regulated peers.
Lapides downgraded the rating on the company from Neutral to Sell, while lowering the price target from $39 to $38.
Near Term Headwinds
The analyst expressed concern regarding near term headwinds due to “Carty cost over-runs and litigation surrounding recovery of surety proceeds as discussed during 1Q16 earnings.”
Portland General Electric has recently raised its cost guidance for the Carty natural gas-fired generating stations, which Lapides believes leads to regulatory and litigation risk as the company tries to recover these costs via customer bills and warranties given to the plant’s contractor.
Lapides also pointed out that the estimates were currently below consensus for 2017 and 2018, due to limited rate base growth potential, following the completion of the Carty construction.
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