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Will DTE Energy Prosper from Economic Revival in Michigan?

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On Dec 12, 2014, we issued an updated research report on DTE Energy Company (DTE - Free Report) . The company reported mixed results in the third quarter 2014, with total revenues surpassing the Zacks Consensus Estimate while earnings per share falling short of it. However, the improving Michigan economy and rising sales volume enabled the company to revise its earnings expectation for 2014 upward.

DTE Energy’s service territory, the state of Michigan has witnessed a gradual economic recovery due to progress in the employment rate, housing and auto markets. These positives may likely boost future utility demand in the state.

The Detroit-based utility follows a disciplined capital spending program, adding new assets and upgrading existing infrastructure under its electricity and gas utilities as well as gas storage & pipelines operations. In the first nine months of 2014, the company spent $1.5 billion in capital expenditure. For 2014, DTE Energy expects its capital outlay to be around $2.2 billion.

This Zacks Rank #3 (Hold) electric utility provider is also diversifying its generation portfolio by investing in renewable energy given the increasing pro-environment stance in the U.S. Its Echo Wind Park commenced commercial operation in the third quarter. The company aims to complete installation of 1000 MW of renewable power production capacity by 2015.

On the other hand, adverse decisions in pending regulatory cases and dependence on rate relief at regular intervals may lead to volatile financial outcomes. Moreover, we are concerned about fluctuating commodity prices.

Key Picks from the Industry

Better-ranked stocks in the same industry include Black Hills Corporation (BKH - Free Report) , PG&E Corp. (PCG - Free Report) , carrying a Zacks Rank #1 (Strong Buy) and The Empire District Electric Co. , having a Zacks Rank #2 (Buy). These stocks may be better choices at the moment.




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