PG&E Corp. Continues to Close the Valuation Gap

By Sam Boughedda

Hedge fund Third Point said in a letter on Tuesday that PG&E Corp. (NYSE:) has continued to close the valuation gap with its regulated peer group.

In the investor letter covering some of the firm’s holdings, they stated that the company’s recent outperformance was driven by the indexing announcement and continued execution by Patti Poppe, PG&E’s recently hired CEO, and her team.

“Management has focused its efforts on mitigating physical and financial risk by building in layers of protection against catastrophic wildfires, financial uncertainty, and rate-payer volatility,” wrote Third Point. “Importantly for a utility company, Ms. Poppe has a plan to make much needed investments in safety, reliability, and service quality via capital investment while simultaneously reducing operating expenses.”

Third Point said it is optimistic about the company’s prospects, with an industry-leading 10% EPS growth and likely dividend reinstatement in 2023.

“PG&E, which currently trades at a 6x discount to peers on ’23 earnings, should continue to re-rate as investors become more familiar with the enhanced regulatory framework under AB1054 and build further confidence in management’s execution capabilities,” the firm concluded.