Source: Investing Posted Friday 02/08/2024, 11:07
JPMorgan adjusted its stance on Centerpoint Energy Stock (NYSE: CNP), lowering the company from overweight to neutral and lowering its target price to $29.00 from $32.00..
The company noted the significant challenges faced by the company following its handling of Hurricane Beryl. The energy company faced criticism for its response to the hurricane, which included prolonged power outages and communications problems, prompting a backlash from politicians and regulators in Texas..
The situation escalated as CenterPoint Energy unexpectedly withdrew its unexpected demand for the state of electric power prices in Texas, a move that came amid increased scrutiny from the state..
This withdrawal and broader rhetoric in Texas regarding potential sanctions has created a significant burden, contributing to the continued underperformance of the stock. JPMorgan expressed concern that market concerns about possible negative scenarios could persist until there is more clarity on several fronts..
The company pointed out that the lack of a clear direction on how Centrepoint will deal with the fallout from the storm, alignment with the governor’s plan, finding a new course for the price issue, managing the cost recovery of the storm, and responding to any legislative changes or other impacts on the utilities sector are all factors contributing to the uncertainty. Financial concerns about the potential effects on credit metrics are further exacerbating the situation..
Despite these challenges, JPMorgan acknowledged that CenterPoint Energy could benefit from strong economic growth in Houston and new rates in other service areas..
However, the company concluded that the previous share premium was no longer justified and expected a longer period before the company could regain the confidence of all stakeholders..
In other recent news, CenterPoint Energy has undergone several analyst adjustments. JPMorgan downgraded the company’s rating from overweight to neutral, citing challenges following the company’s response to Hurricane Beryl and the unexpected withdrawal of its unexpected demand for the CEHE rate issue.
Similarly, KeyBanc Capital Markets revised its rating from “overweight” to “sectoral weight” due to the company’s decision to withdraw its request for the Houston Electric price issue, resulting in regulatory uncertainty..
BMO Capital also downgraded CenterPoint Energy’s rating from “outperformer” to “market performer” and lowered its price target to $28 after the company withdrew its baseline rate and system resiliency plan issue from the Texas Public Utilities Commission review..
Despite these cuts, CenterPoint Energy reported consistent financial performance for the second quarter of 2024, matching earnings per share forecast, and reaffirmed the range of its 2024 full-year guidance that is not GAAP compliant at $1.61 to $1.63.The company has also made progress in regulatory approvals and settlement discussions, earning approval for its final settlement in Texas gas jurisdictions..
