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TheStreet Open House

Will This Price Target Increase Help Entergy (ETR) Stock Today?

Stocks in this article: ETR

Story updated at 10 a.m.to reflect market activity.

NEW YORK (TheStreet) --Jefferies raised its price target for Entergy (ENTR) to $72 from $70.50 Wednesday.

Entergy gained 1% to $72.67 in morning trading.

The firm reiterated its "hold" rating for the stock. Analysts Paul B. Fremont and Anthony C. Crowdell wrote that the increase is due to higher commodity prices for power, and the effects of EWC on results.

"Our price target of $72.00 (previously $70.50 per share) is based on our P/E valuation for utility stand-alone operations less parent costs. Our valuation ascribes zero value to EWC longer term," the analysts wrote. "Taking our adjusted utility 2016 earnings of $4.50 times a 15.0 P/E multiple, equivalent to our 2016 regulated large cap group average multiple, we arrive at a price target of $67.50. To this we would add $4.50 of estimated value for positive EWC free cash flows and net operating loss carryforwards. Based on yesterday's closing price of $71.97 this represents 12-month price appreciation potential of 0.4% and 12-month total return potential of 5.0% including the company's current dividend yield of 4.6%. Key risks include sensitivity of the non-regulated generation segment to commodity prices, and/or a regulatory requirement to construct cooling towers at Indian Point."

Must read: Warren Buffett's 10 Favorite Growth Stocks

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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Separately, TheStreet Ratings team rates ENTERGY CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate ENTERGY CORP (ETR) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • ETR's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 10.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $989.76 million or 37.37% when compared to the same quarter last year. Despite an increase in cash flow, ENTERGY CORP's average is still marginally south of the industry average growth rate of 42.87%.
  • ENTERGY CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ENTERGY CORP reported lower earnings of $3.98 versus $4.75 in the prior year. This year, the market expects an improvement in earnings ($5.32 versus $3.98).
  • In its most recent trading session, ETR has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Electric Utilities industry. The net income has significantly decreased by 49.9% when compared to the same quarter one year ago, falling from $301.85 million to $151.35 million.
  • You can view the full analysis from the report here: ETR Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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