Jefferies Upgrades Consolidated Edison, Believes Co Is Trading Below Asset Valuation

Consolidated Edison, Inc. ED shares are currently trading at a group average multiple, although the stock has historically traded at a 5–15 percent premium to its regulate utility peers.

Jefferies’ Anthony C. Crowdell upgraded the rating on the company from Hold to Buy, while raising the price target from $80 to $82.

Rate Settlement

“We believe the company will announce the details of a previously announced rate settlement based on a 9.0 percent ROE and view the April 2016 Stagecoach pipeline JV as a placeholder for future growth,” Crowdell mentioned.

The analyst believes the details regarding the settlement in CECONY would also be released by Consolidated Edison in the next few weeks.

Related Link: Citi On Consolidated Edison: "Solid Story Though Well Understood"

“Back in June CECONY, NYPSC Staff, and other parties to the proceeding had agreed to enter settlement negotiations regarding the utility’s electric and gas rate filing,” Crowdell explained.

ROE Concerns

Investors had earlier been concerned regarding a lower than 9 percent ROE. However, given the recent settlement for Brooklyn Union Gas at 9 percent, the analyst believes that there is little risk of the ROE being lower than 9 percent.

The analyst also believes the delay in the announcement of the details could be because this is the first rate proceeding for CECONY since the Reforming the Energy Vision.

However, Crowdell does not expect this delay to impact the utility’s ability to earn its allowed return or to minimize any future capex needs.

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