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Market Price (8/3/2017): $28.47/share; ST-Target: $36/share; NIV: $55/share
Raising ST-Target to $36 from $35 and NIV/share to $55 from $51 on 2Q2017 results which reaffirms our belief CNP will perform at higher end of 2017E AEPS guidance, if not above it, and our concurrence with management that CNP will perform at higher end or even above its targeted 4%-6% CAGR in AEPS thru 2018. We agree with divestiture of Enable Midstream Partners (ENBL) and chosen disposition method seems to be for stock, although we’d prefer cash. We continue to believe CNP is best owner of Oncor but no movement from CNP. Transaction for stock on ENBL indicates to us continued steady investment in CNP and buyer’s stock would be used as equity financing for internal expansion. We note this is a conservative strategy but doesn’t preclude major strategic initiatives, just that there’s none on the plate in the foreseeable future. Wouldn’t surprise us if CNP delved back into pipeline business at a later date, but strictly pipelines only. We continue to support CNP’s commitment to natural gas retail services. We’re pleasantly surprised to see CNP continue to guide higher in 2017 and 2018. We believe demographics continue to provide tailwind and new Washington policies are likely to provide additional uplift. Dividend yield likely to stay strong too. We like new tranny project into Freeport, TX.