DTE Energy Is All Gassed Up, Raises Guidance

Macquarie said DTE Energy Co (NYSE: DTE) remains its top pick of SMID cap regulated utilities after the company announced plans to acquire midstream assets in Pennsylvania and West Virginia for US$1.3 billion and increased its FY16 outlook.

The brokerage also reiterated its Outperform rating and raised its price target on shares by $2 to $107.

A regulatory filing on Monday shows that the company raised its FY16 operating EPS guidance to $5.09–$5.35 from $4.91–$5.19 estimated previously. The consensus estimate calls for earnings of $5.07 a share.

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Meanwhile, the acquisitions are in line with DTE's stated intentions to be an opportunistic buyer of midstream assets.

"We see these assets as attractive strategically given their location, contracts, diversified list of customers, potential for expansion and interconnection with DTE's existing systems," analyst Andrew Weisel wrote in a note.

"We estimate these deals will add US$0.04/sh (+0.8 percent) in '17 and US$0.15/sh (+2.3 percent) by '20, ahead of DTE guidance of US$0.10. We assume a 50/50 debt/equity mix, 12 percent IRR and 10 percent annual growth," Weisel continued.

In addition, the analyst raised his ‘16/'17/'18/'19 EPS estimates to $5.21/$5.42/$5.78/$6.12, including these midstream acquisitions from $5.12/$5.35/$5.68/$5.98.

At time of writing, shares of DTE were down 1.26 percent at $95.41.

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