What Do Analysts Recommend for Dominion Resources?
Will Mild Weather Cool Down Dominion Resources’ 4Q15 Results?
Price targets
According to Wall Street analysts’ consensus, Dominion Resources (D) has a one-year price target of $77.70 against its current market price of $69.70 on January 27, 2016. This comes to an estimated upside of 11% in one year. Of the 25 analysts tracking Dominion Resources, ten recommend a “hold” while 15 recommend a “buy.” None of the analysts recommend Dominion as a “sell.”
Duke Energy (DUK) has a one-year estimated upside of ~6%, according to analyst estimates. It has a price target of $75.9 against its current market price of $71.8. Another utility giant, NextEra Energy (NEE), has an estimated price target of $117.6. This amounts to a possible upside of 11%. NEE is currently trading at $105.6.
Outlook
Dominion Resources is planning to spend ~$19.2 billion in the next five years. This aggressive capital spending may help Dominion in periodic rate hikes. The company also continues to strengthen its transmission and distribution network to improve operational effectiveness. Management has reaffirmed that there will not be a merger or acquisition deal, as Dominion is in better shape to achieve modest growth.
Dominion continues to add to its current generation capacity with healthy fuel alternatives. Its 1,358-megawatt natural-gas-fired power plant will be operational in 2H16. Plus, the Greensville County nuclear plant, with a capacity of 1,588 megawatts, is expected to be operational in 2018. Dominion aims to have contracted solar projects worth 625 megawatts by the end of this year to enhance its renewable generation portfolio.
Fortifying its Dominion Generation segment could prove an appropriate strategy in the long term for Dominion Resources, as it contributes nearly 65% to the company’s total earnings.
Dismal electricity demand growth has been a concern for many utilities (XLU) in the United States. As a result, they have been facing revenue headwinds in the last couple of years. However, the company has noticeable exposure to natural gas operations, which could benefit from lower natural gas prices (UNG).
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