In a report published Wednesday, Morgan Stanley analyst Stephen J. Maresca upgraded the rating on Spectra Energy SE from Equal-Weight to Overweight, and raised the price target from $32.00 to $40.00.
In the report, Morgan Stanley noted, “Yesterday's surprise announcement that SE will drop down all of its remaining U.S. Gas Transmission and Storage assets into SEP by year end is a significant change in management and board strategy, in our view. The company stated that no further details will be given until the earnings call on August 6th as it finalizes its plan. We believe a deeper change in strategy could be afoot, pushing SE to become more of a pure-play GP company with better dividend growth and more keenly focused on unlocking shareholder value. We expect dividend growth to now accelerate to 10 – 12% y/y from 6 – 7% ($0.12/share per annum guided, up from $0.08). SE is now fully embracing use of its MLPs (SEP & DPM) and this execution should serve to highlight the value embedded in the IDRs that SE receives from its GP ownership(s). We think additional strategic options to unlock value could be considered (particularly where we potential at DPM and its growing GP IDRs).”
Spectra Energy closed on Tuesday at $30.32.
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