Xcel Energy's Capital Spending, Likelihood Of Colorado Project Approval Fuel Mizuho's Upgrade

Xcel Energy Inc XEL's s fiscal year 2018 results released Feb. 7 prompted Mizuho Securities to revisit its thesis on this utility holding company.

The Analyst

Analyst Paul Fremont upgraded Xcel Energy from Neutral to Buy, with a price target of $47.

The Thesis

Higher capital spending at Xcel Energy's utility subsidiaries, ability to retain tax reform benefits in its jurisdictions, lower effective tax rates and higher margins at its utilities, prompted upward revisions to the 2018-2020 earnings per share estimates for the company, Fremont said in a Tuesday note.

The analyst increased his 2019-2020 earnings per share estimates by roughly 10 cents each, while also initiating his 2021 estimate at $2.91.

Additionally, Mizuho sees additional upside opportunity, given the high likelihood of the Colorado Energy Project, or CEP, getting approval. If the CEP is approved, the firm sees 8-10 cents of accretion, assuming the project is funded with a mix of debt and equity.

Despite the higher levels of holding company debt, relative to group, Fremont estimates Xcel Energy's FFO/debt to be in the range of 16-17 percent.

The Price Action

Xcel shares are down about 1 percent over the past year. At time of writing, shares were up 2.5 percent on the day at $45.28.

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