(By Balachander) Vectren Corp. (NYSE:VVC) shares were initiated with a "Buy" rating and $36 price target by analysts at Brean Murray, Carret & Co. (BMC) on an attractive valuation.
BMC analysts Michael Gaugler and Christopher Noon see significant long-term upside earnings potential in the company's business model both in the regulated and non-regulated businesses.
"Our positive thesis is driven by opinion that the regulated utility assets are worth $31 on a stand-alone basis, and that the remaining non-utility businesses are well positioned to deliver significant, additional earnings as economic conditions and demand for its energy services and products returns," the analysts wrote in a note.
The analysts said Vectren's regulated gas and electric utility operations comprises 80 percent to 85 percent of the company's core earnings, providing a predictable stream of profits and significant investment platform in rate base for future growth.
Gaugler and Noon also noted that the shares currently yield 4.7 percent, slightly above BMC's combination gas/electric utility peer group.
Evansville, Indiana-based Vectren provides natural gas distribution, transportation and electric distribution services. Vectren's total generation is nearly 1,300 megawatts (MW) and includes 1,000 MW of coal-fired generation, 295 MW of gas-fired generation and 3.2 MW of landfill gas-fired power.
The stock, which has been trading in the 52-week range of $23.65 to $30.75, added 0.41 percent to trade at $29.39 on Wednesday.