UPDATE: Morgan Stanley Reiterates on ITC Holdings on Surprising Growth Upside

In a report published Wednesday, Morgan Stanley analyst Rajeev Lalwani reiterated an Overweight rating on ITC Holdings (NYSE: ITC), and raised the price target from $38.00 to $44.00.

In the report, Morgan Stanley noted, “Upside to growth was surprising, which could be as high as 16% per year. We expected ITC's prior growth estimate of 15-17% to decline meaningfully in the upcoming years as its system matured, and were surprised by the company's strong case to maintain elevated growth (3-4x utility peers) through 2018. ITC outlined baseline growth of 11-13%, with potential upside from $250mil in likely buybacks through 2015 and the ability to either invest ~$1.5bil or buyback stock of $1.0bil (inclusive of the $250mil) through 2018.

"We view this growth upside as achievable, and believe execution risk is minimal given the mix of buybacks and development projects which could boost growth by 200-300bps. Therefore, we are increasing our long-term growth forecast, raising our price target to $44 to reflect a higher premium, and reiterating our OW rating given an implied total return of +20%.”

ITC Holdings closed on Tuesday at $37.22.