DTE Energy Earnings: Choppy Near-Term Results, but Still Long-Term Upside

We are reaffirming our $116 fair value estimate for DTE Energy DTE after the company reported $1.44 per share of earnings from continuing operations during the third quarter of 2023, down from $1.60 during the same quarter in 2022. Mild weather and unusual storm activity were the primary negative year-over-year effects, partially offset by operating cost-savings. We are reaffirming our narrow moat rating.

Management cut their 2023 EPS guidance midpoint to $5.75 from $6.25, citing $145 million of unanticipated storm expenses and $126 million of unfavorable weather that reduced electricity and gas sales. Without those events, full-year earnings would be on track to finish toward the high end of management’s initial $6.09-$6.40 EPS guidance range.

We plan to incorporate these effects and reduce our 2023 earnings estimate, but this does not have a material impact on our fair value estimate. We consider storm costs, weather variations, and temporary cost-savings as one-time events. We are reaffirming our outlook for 2024 and beyond, assuming normal weather.

Management also withdrew their 6%-8% annual EPS growth rate target pending a decision expected in early December regarding their $622 million electric rate increase request. We continue to assume 6% annual average long-term earnings growth.

We think DTE’s long-term growth opportunities remain attractive and continue to assume the company invests $23 billion during the next five years. Backing this investment is the 20-year electric integrated resource plan settlement earlier this year and a $9 billion five-year electric distribution grid plan filing in late September that we expect will receive support from regulators and customers.

We also don’t expect the board to announce a dividend increase until after the rate-case decision. We continue to assume 7% annual dividend growth for at least the next few years as long as utility rate regulation remains constructive in Michigan.