Pepco’s (POM: 15.94 +0.15 +0.95%) $1.2 billion Mid-Atlantic Power Pathway (MAPP) transmission project could be delayed due to slower-than-expected load growth. The PJM Interconnection is expected to update the Regional Transmission Expansion Plan (RTEP) in June 2010 and a 1-2 year delay in the project is likely.
Pepco Holdings current trailing 12-month earnings multiple is 17.5, compared to the 21.0 average for the peer group and 18.7 for the S&P 500. Over the last five years, the company s shares have traded in a range of 7.4x to 22.6x trailing 12-month earnings. The trailing 12-month EV/EBITDA multiple is slightly above the industry average.
We continue with an Underperform recommendation as we expect the stock to face stiffer competition from its fully regulated peers with similar dividend yields, going forward. Our $14 target price values the stock at 11.3x 2011 EPS.
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