Consolidated Edison: Hold Rating Amid Regulatory Challenges and Valuation Concerns

Jefferies analyst Julien Dumoulin Smith maintained a Hold rating on Consolidated Edison (ED – Research Report) yesterday and set a price target of $113.00.

Julien Dumoulin Smith has given his Hold rating due to a combination of factors surrounding Consolidated Edison’s current financial and regulatory environment. The recommendation stems from the ongoing rate case negotiations, where there is a significant gap between the company’s request and the staff’s recommendation, particularly in terms of revenue requirements and rate base adjustments. The staff’s proposed return on equity (ROE) of 9.3% aligns with expectations, but the recommended electric rate increase is substantially lower than requested, which introduces uncertainty.
Additionally, the stock is trading at a 3% premium, and there is no clear indication that this premium will expand significantly in the near term, especially with the pending rate case. While there is potential for settlement discussions to lead to a slightly higher ROE, the current situation suggests limited upside for the stock. Therefore, the Hold rating reflects a cautious stance, considering the regulatory challenges and the current valuation of the stock.

In another report released yesterday, Mizuho Securities also maintained a Hold rating on the stock with a $105.00 price target.

ED’s price has also changed slightly for the past six months – from $98.500 to $103.860, which is a 5.44% increase.