Sum-Of-The-Parts Analysis On Chesapeake Utilities Leads Janney To Upgrade Stock

Janney upgraded Chesapeake Utilities Corporation (NYSE: CPK) to Buy from Neutral, lifting its price target to $71 from $59.

In the report published Monday, the analysts noted that the company's 2Q16 results showed solid improvement YoY and came in well above the consensus forecast. They believe the company's robust investment profile continues to generate higher earnings, and continued CAPEX should allow for future growth throughout their published forecasts.

Related Link: Chesapeake Utilities Reports FERC Approved Plans by Eastern Shore Natural Gas, Estimated to Cost ~$36M

"While valuation drives ratings and Fair Value estimates, we feel it relevant to highlight that the positive forward outlook is strengthened by our belief that projects of size are likely to occur in the coming years as Marcellus Shale gas finds its way south in a more pronounced way to CPK's geographic footprint," wrote Janney.

The analysts also highlighted the fact that the company's dividend payout is relatively low versus its peer group, which would enable it to defend the share price on yield basis more aggressively than some of its peers in the electric & gas group, in case the macro interest rate environment become less favorable.

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