On Monday, Guggenheim adjusted its outlook on Dominion Resources, Inc. (NYSE:D), reducing the stock's price target to $52 from the previous $57 while still endorsing a Buy rating for the utility company.
The firm highlighted Dominion's transformation following a strategic review, which positions it as a 5-7% growth opportunity. The review's conclusion and the divestiture of half of the company's large project risk are seen as key steps in Dominion's potential rise to a premium position within the utility sector.
Dominion is now perceived as a more straightforward investment proposition, with a focus on its Southeastern rate base and sales-growth potential. The firm's analysis suggests that Dominion's growth story in Virginia stands out favorably against its peers.
Additionally, the business model is considered fully derisked, with a normalized regulatory environment in Virginia and reduced concerns over cost overruns for the Coastal Virginia Offshore Wind (CVOW) project, thanks to settlements and strategic partnerships.
The analyst firm believes that Dominion's strategic review has placed it ahead of the curve in addressing sector-wide issues such as regulatory resets and balance sheet management.
Dominion's avoidance of the complications faced by other utilities is seen as offering a clear opportunity for growth that is not yet reflected in current estimates. The company's large-cap, liquid status, coupled with low regulatory risks, positions it well to attract investment when the utilities sector returns to favor, which is anticipated in the second half of the year as the rate environment becomes clearer.
The firm's confidence in Dominion is rooted in several factors, including the company's differentiated growth story in Virginia and the expectation of low-noise 5-7% growth. The potential for additional growth opportunities not currently included in estimates also supports the positive stance on Dominion's shares.
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