Barclays has reaffirmed its underweight rating and $29.00 price target for CenterPoint Energy (NYSE: NYSE:CNP), as the market anticipates the company's third-quarter results due on October 28.
The firm anticipates that CenterPoint Energy will continue the practice of initiating guidance for the upcoming year during the third quarter, despite the uncertainties surrounding the CEHE rate case filing.
The Public Utility Commission of Texas (PUCT) is scheduled to decide on the withdrawal of the CEHE rate case on October 24.
The outcome of this meeting is deemed crucial by Barclays, as it may significantly influence the company's ability to reiterate its long-term guidance and 2024 forecasts.
CenterPoint Energy has consistently reaffirmed its long-term guidance, including the 2024 guidance, despite facing political and regulatory challenges stemming from storm responses, which have led to operational and maintenance costs as well as financing issues.
Barclays projects a third-quarter earnings per share (EPS) of $0.33, which falls short of the consensus estimate of $0.42 and the third quarter of 2023 figure of $0.40. The expected shortfall is attributed to operational and maintenance costs, particularly due to foregoing $70 million in hurricane-related cost recovery. However, Barclays maintains its full-year 2024 EPS estimate at $1.62, which aligns with the midpoint of the company's guidance range.
Furthermore, Barclays anticipates that CenterPoint Energy will reiterate its 2024 EPS guidance of $1.61 to $1.63 and its target for 6-8% annual growth from 2025 to 2030, conditional on a favorable outcome in the General Rate Case (GRC).
This includes expectations of minimal revenue decrease and reasonable authorized returns on equity (9.4% or higher). For the fiscal year 2025, Barclays suggests an EPS guidance midpoint of $1.71, slightly below the Bloomberg consensus of $1.73, reflecting approximately 6% growth from the 2024 guidance midpoint.
The firm also expects CenterPoint Energy to reaffirm its current capital plan of $44.5 billion through 2030, with potential upside from the Storm Recovery Plan (SRP). Any additional equity needs are anticipated to be addressed through a 50/50 capital structure, aiming for a 14-15% funds from operations (FFO) to debt ratio by 2030.
In other recent news, CenterPoint Energy has seen significant developments. The company has matched its per-share earnings expectations for Q2 of 2024 and maintained its full-year 2024 non-GAAP EPS guidance range at $1.61 to $1.63. In a move demonstrating its commitment to shareholders, CenterPoint Energy increased its quarterly cash dividend to $0.2100 per share, marking an 8% average annual growth over the past three years.
However, the company faced downgrades from Wells Fargo, JPMorgan, KeyBanc Capital Markets, and BMO Capital due to regulatory concerns following Hurricane Beryl. CenterPoint Energy has also announced a $250 million stock sale managed by Barclays Capital Inc. and Citigroup, and received approval for its final settlement in Texas Gas jurisdictions. The company is progressing with the sale of its Louisiana and Mississippi gas Local Distribution Companies (LDCs), expected to close in Q1 2025.
InvestingPro Insights
As CenterPoint Energy (NYSE:CNP) approaches its third-quarter earnings release, InvestingPro data provides additional context to Barclays' analysis. The company's P/E ratio of 18.15 and adjusted P/E ratio of 18.84 for the last twelve months as of Q2 2024 suggest a relatively moderate valuation. This is particularly interesting when considering one of the InvestingPro Tips, which indicates that CNP is "Trading at a low P/E ratio relative to near-term earnings growth."
The company's dividend yield stands at 2.84%, with a notable dividend growth of 10.53% over the last twelve months. An InvestingPro Tip highlights that CenterPoint Energy "Has maintained dividend payments for 54 consecutive years," underscoring the company's commitment to shareholder returns despite the challenges mentioned in the article.
While Barclays projects an EPS of $0.33 for the third quarter, it's worth noting that CenterPoint Energy's basic and diluted EPS from continuing operations for the last twelve months as of Q2 2024 were both $1.62, aligning with Barclays' full-year 2024 EPS estimate.
For investors seeking a deeper understanding of CenterPoint Energy's financial health and prospects, InvestingPro offers 6 additional tips, providing a more comprehensive analysis to complement the information in this article.
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