We are upgrading our long-term recommendation on DTE Energy Company (DTE) to Outperform after a resounding bottom-line beat in the third quarter, which fully offset the effects of a lower top-line. The bottom-line was helped by significant demand for electricity due to warmer weather and higher numbers from its storage and transportation business.
Our bullish outlook for DTE Energy is supported by its stable and growing utilities and its complementary non-utility businesses. Going forward, the growth momentum will be maintained by beneficial regulatory policies in Michigan, higher authorized rates for its regulated business, growth opportunities in its un-regulated businesses and an industry-high dividend yield.
There are also plans to monetize its Barnett Shale assets and other properties, which would alleviate the need for external borrowings. Our six-month target price of $74.00 equates to about 19.0x our earnings estimate for 2012.
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