Morgan Stanley Shares Positive Outlook On Entergy Following Court Ruling

Morgan Stanley's Stephen Byrd on Monday upgraded shares of Entergy Corporation (NYSE: ETR) to Equal-weight from Underweight with a price target raised to $91 from a previous $77.

Byrd cites a December 11 court decision in which the NY State Appellate Court reversed the lower court decision which “strongly” favors Entergy, and a prolonged life for the Indian Point nuclear power plant.

Under the ruling, the company is not required to seek a new coastal consistency certification from the state to obtain a license renewal for its Indian Point units two and three from the Nuclear Regulatory Commission.

Indian Point is a “key driver” of the stock and under previous models, the analyst assumed that Indian Point would be shut down by the end of 2018. Following the ruling, the analyst is now assigning a 90 percent probability that Indian Point will remain online through an extended license life.

“In our view the decision, if it withstands a potential appeal, would mean that NY State arguments that Indian Point's usage of cooling water from the Hudson River is not allowed, would no longer be permitted,” Byrd wrote. “This legal issue has in our view been the most potent issue facing Indian Point.

Byrd also adds that Entergy still needs to settle disputes relating to a Water Quality Certificate for the plant in addition to other Nuclear Regulatory Commission issues. However, the analyst states these are “lower-probability, lower-cost issues.”