Tuesday, Credit Suisse upgraded Pepco Holdings, Inc. (POM) shares to Outperform from Neutral and increased its price target to $16 from $13.
Analyst Eggers noted that POM's utilities have constructive regulatory environments, improving earnings transparency with more adoption of decoupling, and reinvestment opportunities to support growth. Four pending rate cases should help '10 but will keep the tape busy.
The analyst said that a major impediment for us has been the consistently too high street consensus estimates, although these have come in recently and might even leave room for upside in out years.
At 7.7%, POM's yield is 220 bp over peers with strong messaging from management that the yield is safe, albeit not growing near-term. The analyst has vocally had his reservations about the high payout but have come to believe that management will hold the dividend at all costs.
The analyst sees opportunity for POM to address a series of strategic issues this fall, possibly at third quarter earnings, that could include finally providing guidance, especially after the huge range seen for most of 2009, strategic review of non-regulated businesses and capex plans to lessen equity raises and focus on the core value of POM's utilities, and more color on growth opportunities at the ESCO business services unit.
The analyst reached his price target of $16 through a combination of sum-of-the-parts valuation as well as specific looks at valuation of the businesses using traditional P/E and EV/EBITDA multiples assuming reversion to 'normal' utility group multiples by business unit.
Currently, POM is up $0.57 or 4.04% and trading at $14.67.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.