Barclays Starts PNM Resources (PNM) at Overweight, 'Small Fish in a Big Pond'

Barclays analyst Nicholas Campanella initiates coverage on PNM Resources (NYSE: PNM) with a Overweight rating and a price target of $40.00.

The analyst commented: "We initiate coverage of PNM Resources (PNM) with an Overweight rating and $40 PT. PNM is a holding company that operates in electric generation, transmission and distribution in New Mexico and Texas. PNM operates in mixed regulatory jurisdictions with the Texas jurisdiction being historically constructive and the New Mexico jurisdiction still unproven with a negative track record, in our view. Given the recent ending of the merger agreement with Avangrid we see PNM focused on growing its asset base (10% CAGR guidance) as well as executing on the current 6-7% LT EPS growth CAGR guide from '24 to '28 (from 5% prior to the 4Q23 call). Management is growing the TNMP and FERC segment rate base with the two currently making up 50%+ (from ~30% in 2018) and moving to 57%+ in the outer years of the plan. However, we see it likely this composition will only accelerate with additional capital revisions in Texas. PNM currently trades at a ~7% P/E discount to our small-cap electric peer group, but the portfolio is high quality, the territories are seeing above average economic growth and we're expecting an improvement in the NM PRC relationship through the next rate case cycle. PNM's portfolio commands scarcity value compared with most small cap, pacific northwest peers and we believe the stock can trade to an in-line multiple through 2024."

For an analyst ratings summary and ratings history on PNM Resources click here. For more ratings news on PNM Resources click here.

Shares of PNM Resources closed at $36.96 yesterday.

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