JPMorgan Says Dominion Resources 'Running Out of Steam,' Downgrades To Neutral

JPMorgan has downgraded
Dominion Resources, Inc.D
to Neutral from Overweight on lower prices at New England power and ITC earnings pullback.

The brokerage noted that New England ATC power prices for 2017 are down 7 percent year-to-date and 20 percent over the last 12 months — worse than most other U.S. regions and pressuring Dominion's Millstone unit in Connecticut despite growing capacity revenues in later years.

"Solar ITCs are expected to contribute approximately $0.30–0.35 to EPS this year and $0.10–0.15 next year, and 37 million new shares from the 2013-14 mandatory convertible debt offerings will dilute growth through 2017," analyst Christopher Turnure wrote in a note.

Related Link: The Market In 5 Minutes: Rates Remain Unchanged, But Hikes Still Loom

Furthermore, the analyst said the company's earnings quality has been under pressure over the recent quarters "with increasing exclusions from adjusted EPS."

Turnure recalled that the JPMorgan industry note last month mentioning Dominion having the largest differences between adjusted EPS and GAAP EPS over the last five years among the 24 names the firm examined.

On the positive side, Turnure highlighted, "The utilities continue to benefit from pipeline integrity programs, above average load growth, new generation and FERC transmission."

"Several low cost pipeline expansions will also benefit the company in 2016-17, and Cove Point is a major earnings and cash flow driver in 2018," Turnure added.

The analyst has cut his 2016 EPS estimate to $3.75 from $3.80 and 2017 EPS view to $3.79 from $3.98. However, Turnure raised his price target on the stock to $81 from $76.

Shares of Dominion Resources closed Wednesday's regular trading session at $73.68 and were down 0.71 percent to $73.21 shortly after Thursday's opening bell.

date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorLong IdeasNewsDowngradesPrice TargetCommoditiesMarketsAnalyst RatingsTrading IdeasChristopher TurnureDominion MillstoneJPMorgan
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...