UBS Raises Price Target on Sempra Energy (SRE) Following REX Interest Sale

UBS reiterated a Buy rating on Sempra Energy (NYSE: SRE), and raised the price target to $116.00 (from $113.00), Following the company's announced sale of 25% interest in the Rockies Express (REX) pipeline to partner Tallgrass for $440M cash proceeds. The sale should optically enhance the CAGR by 140 bps. However, UBS does not expect management to rely on this mechanism to maintain or improve its projection.

Analyst Julien Dumoulin-Smith commented, "We expect management to remain confident of its 5-yr projection for annualized basecase EPS growth of 11% or better as the company rolls its forecast forward to 2016-2020, with 2016 as the new base year. Although the reduced base resulting from the recently announced sale of SRE's 25% interest in the Rockies Express (REX) pipeline should optically enhance the CAGR by 140 bps, we do not expect management to rely on this mechanism to maintain or improve its projection. We continue to note that the utility general ratecase (GRC) settlement would be accretive to the 11% if approved asis (a final order expected shortly). Also additive is potential upside from Distribution Resource Plan capex, Mexican pipeline development wins, reinvestment of REX proceeds, and anything more than modest renewables growth."

For an analyst ratings summary and ratings history on Sempra Energy click here. For more ratings news on Sempra Energy click here.

Shares of Sempra Energy closed at $104.05 yesterday.

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