We are maintaining our 2017 eps estimate of 291 but

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* We are maintaining our 2017 EPS estimate of $2.91, but are raising our 2018 estimate to $3.11 from $2.98. * Our revised 2018 estimate reflects the continued expansion of the company’s electric and gas transmission and distribution facilities, as well as its favorable natural gas supply position. * PEG trades at 16-times our revised 2018 EPS estimate, below the average multiple for electric and gas utilities with both regulated and nonregulated assets. ANALYSIS INVESTMENT THESIS Our target price on BUY-rated Public Service Enterprise Group Inc. (NYSE: PEG) is $56, based on the company’s growing network of transmission assets and its well-managed regulated utility subsidiary, Public Service Electric & Gas Co. (PSE&G). We view the company’s increased spending on electric transmission and gas pipeline projects as a strong plus, as these facilities are more likely to provide higher returns on equity than those earned on distribution and generation assets. We expect above-average growth in the company’s rate base from infrastructure investments, as well as higher profitability in its nonregulated operations. In addition, we continue to expect annual dividend growth of 4.0%-5.0% over the next several years. The shares currently offer a solid dividend yield of about 3.4%. Utilities as a group are heavily debt-financed and aggregate interest charges are likely to rise. In addition, in a rising interest rate environment, equity investors seeking income more often than not move away from utility industry shares and turn to the bond market, as fixed-income rates begin to rise. Even so, we think Public Service, with its strong finances and solid management execution, will outperform other utilities in a rising interest rate environment. The company should continue to benefit from strong cost controls, solid cash flow from operations, a strong management team, and what we view as a favorable regulatory environment at both the state and federal levels. In addition, our positive assessment reflects the company’s efficiently operated nuclear generation units, focus on balance sheet improvement, and expanding economic activity in its service area. We believe that the company’s core business strategy complements its well- balanced asset portfolio, and that its regulated electric and gas business is well positioned for growth beyond 2018. RECENT DEVELOPMENTS Over the past three months, PEG shares have fallen 1%, compared to an increase of 7% for the S&P 500. Over the past 52 weeks, the shares have risen 14%, compared to an advance of 20% for the S&P 500. The five-year track record shows an increase of 59% for PEG, versus a gain of 91% for the S&P 500. The beta on PEG shares is 0.23. EARNINGS & GROWTH ANALYSIS Management’s 2017 operating earnings guidance is $2.80-$3.00 per share. The company will report fourth-quarter and full-year results for 2017 on February 23, We are maintaining our 2017 EPS estimate of $2.91, but are raising our 2018 estimate to $3.11 from $2.98. Our revised
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