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DTE Energy Gets Added to Goldman's Conviction List

Goldman says 'DTE represents our top regulated utility idea in our coverage universe.'
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DTE Energy  (DTE) - Get Free Report was added to Goldman Sachs' American Conviction List Tuesday by analysts who said the utility company "offers an attractive growth position."

Shares of the Detroit company were up slightly to $116.19 on Tuesday and have been risen 12.5% year to date.

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Goldman maintained its buy rating on DTE Energy, while trimming its price target to $135, down from $150.

The conviction list highlights stocks that analysts expect to outperform the market in the near future.

"DTE represents our top regulated utility idea in our coverage universe," analyst Insoo Kim said in a research note.

The analyst said that following the completed separation of its midstream operations into DT Midstream, DTE now derives roughly 90% of its earnings from its Michigan-based regulated utility, "with robust investments in a constructive regulatory environment - with above-average allowed returns and mechanisms to reduce regulatory lag - supporting best-in-class 7-8% operating earnings growth through 2024E."

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"Combined with its other non-regulated earnings focused on clean energy investments like renewable natural gas ," the analyst said, "DTE offers an attractive growth proposition with a de-carbonization focus across its segments that deserve a best-in-class valuation premium, in our view, not currently appreciated in the stock’s current 3% relative P/E premium versus Regulated Utilities."

DTE’s service territory largely comprises the greater Detroit area for the electric utility at 80% of rate base, Kim said, the smaller gas utility, 20% of rate base provides utility services across Michigan, with some overlap around Detroit. 

"De-carbonization opportunities on both the gas and electric sides help drive earnings growth through increased investment opportunities," the analyst said.

On Friday, Mizuho analyst Anthony Crowdell lowered his price target on DTE Energy to $123 from $146 and kept a buy rating on the shares following the spinoff of DT Midstream.