PNM 3Q2017: PNM beat but keeping guidance unchanged; this is overly conservative

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Market Price (10/27/2017): $43.25/share; ST-Target: $55/share; NIV: $88/share

  • Keeping guidance implies 4Q17 would be no more than $0.20, which we feel is too low
  • PNM accounts for low 4Q17 guidance due to higher donations to PNM’s Foundation and higher costs
  • New guidance for CAGR in AEPS to 2021 of 6%, but dividend CAGR likely higher. We estimate CAGR in AEPS thru 2021 at some 7.7%.
  • Lowering our 2018E AEPS due to 2016 rate case
  • We see upside driven mostly by better economic performance
  • PNM’s future depends on regulatory matters, in our opinion
  • Total capex estimate is some $3,254MM (some $1,557MM of depreciation) for 2017-2021
  • PNM may need to issue equity to fund its capex program using the at-the-market structure beyond 2019
  • Guidance meeting December 8, 2017 at New York Stock Exchange

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