DTE Energy Earnings: Overcoming Warm Winter, Storms Will Be Task for 2023

We are reaffirming our $116 fair value estimate for DTE Energy DTE after the company reported earnings per share of $1.33 from continuing operations during the first quarter of 2023, down from $2.31 during the same quarter in 2022. The drop was primarily due to unfavorable warm winter weather and large storms, as we expected. We are reaffirming our narrow moat and stable moat trend ratings.

Our 2023 outlook and long-term growth estimate remain in line with management’s $6.09-$6.40 EPS guidance for 2023 and 6%-8% annual growth target. We expect the board will continue raising the dividend 7% annually for at least the next few years even if 2023 earnings growth lags management’s target.

Earnings at DTE’s electric business fell nearly in half during the first quarter as a result of weather and higher storm expenses. Earnings at DTE’s gas business also fell substantially due to unfavorable weather. These headwinds will be difficult to make up during the rest of the year, but we think DTE can still reach at least the low end of its guidance range. Strong performance during the summer will be key.

The swing from colder-than-normal weather in 2022 to warmer-than-normal weather in 2023 represented a $0.34 per share year-over-year change in consolidated earnings. Storm expense was a similar drag on 2023 earnings. The rest of the year-over-year drop in earnings was related to energy trading items that management said should reverse throughout the year.

We await two significant regulatory rulings later this year that will impact earnings in 2024 and beyond. We expect a constructive outcome in DTE’s $622 million electric rate increase request and its 10-year electric integrated resource plan. Both rulings should support DTE’s plan to invest at least $23 billion during the next five years. We think it is a good sign for DTE that Michigan utility CMS Energy recently reached constructive outcomes for its electric rate request and IRP.