On Monday, Jefferies analyst team made adjustments to Dominion Resources, Inc.’s (NYSE:D) financial outlook, reducing the company’s price target from $58.00 to $55.00, while maintaining a Hold rating on the stock. With a current market capitalization of $45.9 billion and trading at $54.63, InvestingPro analysis indicates the stock is trading near its Fair Value. The analysts provided insights into the revised valuation, citing a scenario analysis that considered potential risks associated with European offshore wind tariffs. They applied an increased discount to Dominion’s price target, which resulted in a $3 decrease.
The Jefferies team also incorporated a new factor into their valuation model, adding a potential value from Dominion’s Millstone nuclear power purchase agreement (PPA). They estimated this value at $75 per megawatt-hour (MWh), assigning a 50% probability to the scenario. InvestingPro data reveals the company operates with a significant debt burden, with a debt-to-equity ratio of 1.64x, which could impact future financing flexibility. This addition was described as favorable in the context of the current uncertainties surrounding offshore wind projects, particularly due to regulatory risks often referred to as the "Trump overhang."
In their commentary, the analysts from Jefferies highlighted the upcoming 4Q24 capital expenditure update from Dominion, which they anticipate to be a positive development. However, they also expect the company to reaffirm its 5-7% earnings per share (EPS) compound annual growth rate (CAGR) projection. Despite this, the long-term EPS forecast was trimmed slightly due to the expectation of higher interest rates in the future, which could impact financing costs for Dominion.
The Jefferies team’s analysis reflects a mix of potential upsides and challenges for Dominion Resources, as they balance the added value from nuclear PPAs against the backdrop of regulatory uncertainties and a changing interest rate environment. Notable strengths include a 43-year track record of consecutive dividend payments, though InvestingPro data shows five analysts have recently revised their earnings expectations downward. For deeper insights into Dominion’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Dominion Energy has experienced several significant developments. The company announced a 9% increase in the total cost of its Coastal Virginia Offshore Wind project, raising the cost from $9.8 billion to $10.7 billion. Despite this, the project remains 50% complete and is slated to finish by the end of 2026. Shahriar Pourreza of Guggenheim Partners commented on the cost increase, noting the importance of supplier performance and schedule constraints for the project’s success.
Additionally, Dominion Energy has made substantial updates to its executive compensation structure. Changes include performance-based cash awards for officers and an adjusted compensation for Edward H. Baine, who assumed the role of President – Utility Operations and Dominion Energy Virginia. The company also announced the retirement of Diane Leopold, the company’s Executive Vice President, Chief Operating Officer, and President – Contracted Energy, with Edward H. Baine taking over the company’s utility operations.
In other developments, Dominion Energy amended its articles of incorporation following the redemption of its Series B Preferred Stock. Lastly, Morgan Stanley (NYSE:MS) initiated coverage on Dominion Energy with an Equalweight rating, noting the company’s stable financial profile and consistent earnings forecast, but limited growth potential compared to its peers. These are among the recent developments affecting Dominion Energy.
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