Westar Energy (NYSE:WR) has become a victim of its own success, as its strong 11 percent increase in share price since the early part of March has ended with Morgan Stanley (NYSE:MS) downgrading them from equal weight to overweight, based on valuation.
Westar shares have already surpassed the price target Morgan Stanley was looking for of $23.75, although the downgrade from Morgan has brought the share down over 5 percent today, as of 3:13 EST.
Morgan Stanley analyst Greg Gordon said about the downgrade, “Since the beginning of the year, WR has been the second-best-performing stock in our coverage universe with a total return of 9.9% vs. the regulated group average of 2.9%. WR is now trading at 11.2x our 2012 earnings estimate of $2.10/share, largely in line with the peer group of 11.4x. While we continue to believe the fundamental story is sound, the balance of risks in the stock appears neutral at the current level.”
The earnings per share outlook from Morgan Stanley for Westar is $1.70 for fiscal 2010, a penny above the consensus of $1.69. For 2011, Morgan is 2 cents above consensus at $1.80 a share, in comparison to $1.78 a share.
