UBS Reiterates Buy on DTE Energy (DTE) as Reduced Equity Issuance Offsets Impact of Bonus Depreciation

UBS reiterated a Buy rating on DTE Energy (NYSE: DTE), and raised the price target to $100.00 (from $98.00). With a relatively minor impact of only $300M-$400M of cash from bonus depreciation deferred taxes through 2020, UBS sees a somewhat reduced earnings growth rate at DTE Electric. However, management's guidance for a lower equity issuance of only $200M-$300M from 2016-2018 should more than offset the reduced earnings.

Analyst Julien Dumoulin-Smith commented, "With a relatively minor impact of only $300M-$400M of cash from bonus depreciation deferred taxes through 2020, we see a somewhat reduced earnings growth rate at DTE Electric at ~5.3% now vs 6.4% in our prior forecast (vs guidance 5%-7%). However, this is more than offset by management's guidance for a lower equity issuance of only $200M-$300M from 2016-2018 (including $100M in 2016) vs the prior forecast for $800M over the three years. Including a delay for Michigan Energy legislation, we reduce our 2016/7 ests a nickel but increase our 2018-2020 ests by 0.03-0.08 for lower equity dilution and now see earnings growth through 2020 toward the upper half of the 5%-6% range, excluding as much as $0.56 of potential upside opportunities from Michigan legislation. Our estimates continue to feather in $0.42 of these opportunities through 2025 at 75% probability, with an additional $3 upside to our valuation at 100%."

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

Shares of DTE Energy closed at $84.08 yesterday.

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