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Great Plains Providing An Entry Point At This Valuation

Current Valuation Opens An Entry Point In Great Plains

Argus maintains its Buy rating on Great Plains Energy Incorporated GXP 0.71% on "clearer earnings visibility, an improving economy in the company's service area, continuing efforts to manage costs, constructive rate regulation and gradual improvement in the allowed return on equity."

Further, the company's acquisition of Westar Energy Inc WR 0.14% is expected to enhance Great Plains shareholder value over the long term. Great Plains Energy agreed to acquire Westar Energy in a combined cash and stock transaction with a value of approximately $12.2 billion.

Moreover, analyst Gary Hovis expects Great Plains shareholders to receive annual returns of 5–6 percent over the next four to five years from stronger kilowatt-hour sales growth and completion of Iatan 2 plant.

The analyst sees 2016 EPS estimate of $1.73 and $1.81 for 2017.

Hovis has a price target of $36 and it implies a potential total return, including the dividend yield, of about 30 percent from current levels.

Great Plains shares are trading at 15.2-times Argus' 2017 EPS estimate of $1.81, above the company's five-year historical average of 14.9.

"Based on the company's improving fundamentals, investments in new infrastructure assets, and the carryover effect of earlier favorable rate case decisions, we think the shares at current prices offer a favorable entry point," Hovis added.

At time of writing, shares of Great Plains rose 1.82 percent on the day to $27.64. Westar was up 0.41 percent at $56.64.

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DateFirmActionFromTo
Oct 2016Wolfe ResearchUpgradesPeer PerformOutperform
Oct 2016Bank of AmericaUpgradesNeutralBuy
Sep 2016BarclaysUpgradesUnderweightEqual-weight

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