KeyBanc Downgrades Vectren Corp. (VVC) to Hold

KeyBanc downgraded Vectren Corp. (NYSE: VVC) from Buy to Hold on valuation and removed its price target (prior $43.00).

Analyst Matt Tucker said, "We maintain that the sale of VVC’s Coal Mining business (announced July 1) is a long-term positive, removing the overhang of uncertainty and negative sentiment around the coal industry and strengthening VVC’s business model by eliminating direct exposure to commodity prices. We presently view VVC as a high-quality electric and gas utility player benefiting from constructive regulation and overall earnings and rate base growth roughly in line with peers, coupled with an attractive pipeline maintenance and construction business from a robust outlook for pipeline integrity and shale-related spending, and an Energy Services business that provides some option value."

"That said, we were somewhat surprised that the Coal Mining sale appears dilutive to our 2015 estimate by roughly $0.05 due to the drag of unabsorbed interest expense. We estimate it could have been accretive by approximately the same amount if the proceeds were used to make-whole call more expensive fixed rate debt, although this would have resulted in a sizeable one-time GAAP loss in addition to the book loss on the sale. We are subsequently trimming our 2015 EPS estimate to $2.51 (from $2.56), and our resulting sum-of-the-parts analysis continues to yield a fair value of roughly $43, or 5% above current trading levels," he added.

For an analyst ratings summary and ratings history on Vectren Corp. click here. For more ratings news on Vectren Corp. click here.

Shares of Vectren Corp. closed at $40.92 yesterday.

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