Wells Fargo Downgrades Evergy After Recent Rally

Shares of Evergy Inc EVRG have been on an uptrend since early March, responding to strong results for two consecutive quarters, management’s positive comments on synergies and capex and encouraging developments in the Sibley docket, according to Wells Fargo.

The Analyst

Wells Fargo’s Sarah Akers downgraded Evergy from Outperform to Market Perform while keeping the price target at $67.

The Thesis

While Evergy seems to be moving in the right direction and the latest developments are positive, these are already reflected in the stock, following the recent run-up, Akers said in the downgrade note.

During the second quarter conference call, management indicated that there were cost savings opportunities beyond the synergies mentioned previously. The company has been contemplating a shift of capex between Kansas and Missouri as well as an increase in the spending outlook of around $850 million through 2022.

“While the comments on cost savings bolster our confidence in the EPS outlook, we are mindful of the sharing mechanism in place in KS,” Akers wrote in a note.

The analyst added that although the potential increase in capex is a positive, the increase of $850 million would accelerate the rate base growth from the current 2-3% to only 3-4%, still significantly below that of peers at 7-8%.

Price Action

Shares of Evergy traded around $64.14 at time of publishing on Thursday.