XEL: Marshall Fire Settlement Will Clear Overhang And Restore Premium Multiple

Analysts have modestly trimmed their blended price target for Xcel Energy by less than $1, to the mid $80s per share, as they balance recent target hikes tied to above consensus long term earnings growth and renewed premium valuation potential against selective downward revisions reflecting sector underperformance and updated utilities coverage.

Analyst Commentary

Recent Street research reflects a constructive but selective stance on Xcel Energy, with most updates highlighting improving fundamentals, clearer legal visibility and the potential for the shares to regain a premium valuation multiple despite pockets of caution around sector performance and valuation.

Bullish Takeaways

• Bullish analysts highlight Xcel's above consensus long term EPS and rate base growth, with some estimates pointing to mid to high single digit annual earnings growth backed by a robust capex pipeline.
• Multiple target price increases into the low to mid $80s and low $90s emphasize expectations that the stock can migrate back toward a premium multiple versus large cap utility peers as legal overhangs fade.
• The Marshall Fire settlement, which came in below some prior worst case assumptions, is seen as clearing a key risk and allowing investors to refocus on Xcel's renewables leadership and cost effective decarbonization opportunities.
• Coverage initiations and rating upgrades frame Xcel as a rare discount to its historical valuation and a potential long duration compounder in a structurally stronger power demand backdrop driven by data centers and grid investment needs.

Bearish Takeaways

• Bearish analysts maintain more cautious Equal Weight or Neutral stances, trimming or only modestly lifting targets around the low $80s and pointing to recent underperformance of the utilities group versus the broader market.
• Some remain wary that sector wide multiple expansion could be constrained if interest rates stay elevated, limiting upside for even higher quality utilities until investors gain more conviction on the rate trajectory.
• A subset of views suggests that while the legal settlement is positive, the associated cash payments and timing of rate recovery still warrant monitoring, particularly for near term earnings cadence and balance sheet flexibility.
• More conservative forecasts assume that Xcel may trade closer to sector averages until it demonstrates sustained execution on its accelerated investment plan, data center driven load growth opportunities and regulatory outcomes across key jurisdictions.

What's in the News

• Xcel Energy reaffirmed its 2025 ongoing earnings per share guidance at $3.75 to $3.85, underscoring confidence in its near term financial outlook (Company guidance filing).
• The company introduced 2026 ongoing earnings per share guidance of $4.04 to $4.16, pointing to continued mid to high single digit growth expectations (Company guidance filing).
• Xcel and telecom co defendants reached agreements in principle to settle Marshall Fire related litigation, with Xcel expecting to pay about $640 million, roughly $350 million of which is covered by insurance, and none to be recovered from customers, while not admitting fault in the matter (Company legal update).

Valuation Changes

• Fair Value: edged down slightly from about $88.47 to about $88.35 per share, a negligible change in the modeled intrinsic value.
• Discount Rate: was essentially unchanged, moving marginally from about 6.96 percent to about 6.96 percent, indicating no meaningful shift in perceived risk or cost of capital.
• Revenue Growth: remained effectively flat, holding near 7.85 percent annually in the updated assumptions.
• Net Profit Margin: stayed stable at around 16.93 percent, with no material adjustment to long term profitability expectations.
• Future P/E: ticked down modestly from about 23.10 times to about 23.07 times, reflecting a slightly lower assumed valuation multiple on future earnings.