On Tuesday, UBS has raised its rating on shares of CenterPoint Energy (NYSE:CNP) from Neutral to Buy, increasing the price target to $37.00 from the previous $31.00. The utility company, currently trading at $31.99 with a market capitalization of $20.85 billion, has shown strong momentum, trading near its 52-week high of $32.86.
According to InvestingPro data, the stock has delivered a robust 14.3% return over the past year. The firm's decision comes as it sees the company reaching a turning point where regulatory risks are diminishing, and a clearer path is being established for handling issues related to mobile generation and the Houston rate case.
The upgrade follows a period of intense discussions regarding the withdrawal application for the rate case, which now seems likely to be settled. Should CenterPoint Energy manage to file a settlement, it could overcome a significant obstacle, thereby reducing the risks associated with the investment. This progress is considered a critical step in improving investor confidence by moving beyond the current uncertainties.
Additionally, there is a developing plan for CenterPoint Energy's mobile generation assets, which is expected to be implemented in San Antonio in the upcoming weeks. This move could resolve ongoing disputes over the company's ownership and use of these assets, further stabilizing its operational outlook.
The company's operational stability is underscored by its impressive 54-year track record of consecutive dividend payments, as highlighted in InvestingPro's comprehensive analysis, which includes over 30 key metrics and insights available to subscribers.
CenterPoint Energy's stock is currently trading at a P/E ratio of 21.26, approximately in line with its peer group average based on projected 2026 earnings. However, UBS believes that the stock presents an attractive investment opportunity, as it seems to be priced for earnings per share (EPS) growth at the lower end of the company's stated 6-8% range. Given the robust rate base growth of around 10% and an anticipated EPS growth of 7.5%, which is supported by the strong economic environment in the Houston area, the firm suggests that a higher multiple could be justified for the stock.
While current analyst price targets range from $29 to $34, detailed valuation analysis and additional insights are available through InvestingPro's exclusive research reports.
In other recent news, CenterPoint Energy has seen a series of developments. The company reported Q3 earnings per share of $0.31, meeting consensus estimates, and reiterated its 2024 guidance range of $1.61 to $1.63. Additionally, CenterPoint Energy initiated its 2025 non-GAAP EPS guidance at $1.74 to $1.76 per share, indicating an 8% growth from 2024.
BMO Capital Markets maintained a Market Perform rating on shares of CenterPoint Energy but increased the price target to $34. This follows a recent settlement agreement related to a gas rate case with the Minnesota Public Utilities Commission, allowing for a two-step rate increase.
Mizuho (NYSE:MFG) Securities and Scotiabank (TSX:BNS) also raised their price targets to $30, maintaining neutral and sector perform stances respectively. CenterPoint Energy has submitted a filing to the Public Utility Commission of Texas to resume settlement discussions related to the Houston Electric rate case and to recoup approximately $450 million in costs from the May Derecho storm.
Lastly, the company has planned a $4.9 billion investment for 2025, contributing to a 10-year capital plan of $47 billion. This investment is expected to support significant organic growth in Texas, particularly in the Greater Houston area, where a 30% increase in peak load is projected by 2030.
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