DTE Energy (DTE) focuses on investment and expansion of renewable energy sources

DTE Energy DTE has long-term capital expenditure plans to improve its infrastructure and renewable energy portfolio. The company is closing coal-fired units and replacing them with clean sources to produce electricity.

However, the Zacks #3 (Hold) rated company faces risks from unfavorable rate changes and challenges in the energy trading industry.

Tailwinds

DTE Energy is implementing a rigorous capital investment program to maintain and improve the reliability of its electric and natural gas infrastructure. The company plans to invest a total of $25 billion over the next five years. It also plans to invest $50 billion over the next 10 years to promote the use of electric vehicles, renewable energy and reliability. With this spending, DTE Energy should be able to achieve a long-term operating profit growth rate of 6-8%.

In addition to its utilities business, DTE Energy continues to make strides in its non-utility businesses, which provide diversification of its revenue stream.

DTE is eliminating coal-fired power plants to increase its share of clean energy in the industry. To that end, DTE Electric has already retired all 11 coal-fired power units at its Trenton Channel, River Rouge and St. Clair facilities, reducing carbon emissions across its portfolio. The company intends to phase out coal-fired power plants in 2032 and aims to achieve net-zero carbon emissions for its power and gas operations by 2050.

Contrary winds

New regulations or interpretations by the Federal Energy Regulatory Commission, the Michigan Public Service Commission or other regulatory organizations could adversely affect DTE Energy. The time that elapses between the occurrence of expenses and their recovery in customer rates could affect the company’s ability to recover costs.

DTE Energy expects that market conditions for its Energy Trading business will remain challenging in the near term. The company believes that commodity price fluctuations and the unpredictability of regulatory changes and changes to Regional Transmission Organization operating guidelines could impact the profitability of this segment.

Actions to consider

Some of the better rated stocks in the same industry are CenterPoint Energy CNP-CNP, IDACORP, Inc. IDA and Consolidated Edison ED, each of them currently has a Zacks Rank #2 (Buy). You can see complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CenterPoint Energy’s long-term (three to five years) earnings growth rate is 7%. The Zacks Consensus Estimate for the company’s 2024 sales indicates a 1% improvement from the prior-year period.

IDACORP has delivered an average earnings surprise of 6.81% over the trailing four quarters. The Zacks Consensus Estimate for IDA’s 2024 sales suggests a 1.1% increase from the prior-year period’s data.

Edison’s consolidated long-term earnings growth rate is 7.4%. The Zacks Consensus Estimate for ED’s 2024 sales is projecting a 3.1% improvement from the prior-year reported results.

Want the latest recommendations from Zacks Investment Research? Today you can download the 7 best stocks for the next 30 days. Click to get this free report