DTE Energy Earnings: Choppy Near-Term Results, but Still Long-Term Upside
We are reaffirming our $116 fair value estimate for DTE Energy DTE after the company reported $1.44 per share of earnings from continuing operations during the third quarter of 2023, down from $1.60 during the same quarter in 2022. Mild weather and unusual storm activity were the primary negative year-over-year effects, partially offset by operating cost-savings. We are reaffirming our narrow moat rating.
Management cut their 2023 EPS guidance midpoint to $5.75 from $6.25, citing $145 million of unanticipated storm expenses and $126 million of unfavorable weather that reduced electricity and gas sales. Without those events, full-year earnings would be on track to finish toward the high end of management’s initial $6.09-$6.40 EPS guidance range.
We plan to incorporate these effects and reduce our 2023 earnings estimate, but this does not have a material impact on our fair value estimate. We consider storm costs, weather variations, and temporary cost-savings as one-time events. We are reaffirming our outlook for 2024 and beyond, assuming normal weather.
Management also withdrew their 6%-8% annual EPS growth rate target pending a decision expected in early December regarding their $622 million electric rate increase request. We continue to assume 6% annual average long-term earnings growth.
We think DTE’s long-term growth opportunities remain attractive and continue to assume the company invests $23 billion during the next five years. Backing this investment is the 20-year electric integrated resource plan settlement earlier this year and a $9 billion five-year electric distribution grid plan filing in late September that we expect will receive support from regulators and customers.
We also don’t expect the board to announce a dividend increase until after the rate-case decision. We continue to assume 7% annual dividend growth for at least the next few years as long as utility rate regulation remains constructive in Michigan.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.