Tuesday, September 21, 2010

Jefferies Raises Sempra Energy (NYSE:SRE) Price Target, Fitch Wary

News of the sale of RBS Sempra Commodities energy solutions division to Noble Gas and Power Corp. brought mixed reactions, with Jefferies increasing the price target on Sempra Energy (NYSE:SRE) and while Fitch said they're maintaining a negative watch.

Jefferies said the reason they raised the price target from $59.50 to $60, was "We find SRE shares undervalued based on P/E valuation.

The sale of Sempra's remaining interest in the RBS Sempra Commodities JV should allow for a higher multiple on a reduced earnings level due to relatively less risk associated with Sempra's other business units."

They reiterated their "Buy" rating on Sempra Energy as well.

Fitch said they're keeping a negative watch on Sempra for the same reasons Jefferies raised the price target, but their concern is what Sempra will do with the capital.

While they say there could be a downgrade ahead, Fitch said they'll wait for the sale of Sempra's North American wholesale power and natural gas unit before making a decision.

Fitch said the wholesale power and natural gas division could fetch from $640 million to $740 million.

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