PNM: 2018-2019 Guidance was in-line with expectations, but upside potential good

2018E and 2019F AEPS guidance was unsurprising coming in at $1.70-$1.80 for 2018 and $2.00-$2.16 for 2019 versus our expectation of $1.81 for 2018E and $2.20 for 2019E and consensus of $1.75 and $2.07, respectively
Total capital expenditure plan of some $2.7B for 2018-2022 is largely unchanged and consolidated 2017-2021 rate base CAGR of 4.5%-6.5% is also largely unchanged
Potential AEPS power for 2020F&2021F is also largely in-line with our view, but conservative, in our opinion, coming in at $2.12-$2.28 for 2020F and $2.16-$2.34 for 2021F or mid-point of $2.20 and $2.25, respectively, versus our estimates of $2.27 and $2.40, respectively
We view guidance as in-line with a conservative bent, which leaves room for upside, in our opinion.
We thought that PNM and other holding companies may have an opportunity to take advantage of the 100% capital investment deduction, if the tax reform passes, by creating a non-regulated entity that invests in utility-like projects
PNM may join a regional Energy Imbalancing Market
While management has largely disavowed using its stock as currency for an acquisition, we believe that PNM may be well situated to do so, particularly in Texas, if it so desires

Conclusion: We believe that PNM is well positioned for upside surprise in its financial performance

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