CenterPoint Energy Inc. (NYSE: CNP) has a solid base of regulated utility assets (electric and gas distribution) and a well-managed and efficiently operated nonregulated interstate gas pipeline. Despite slumping energy prices in 2015, a key analyst sees some solid upside in this company in the years ahead.

Argus reiterated a Buy rating for CenterPoint with a price target of $25, implying upside of 38% from current prices. The firm believes the company’s fundamentals remain strong and that the recent share price pullback provides a favorable entry point.

The rating is based on the company’s growing rate base through an expanding infrastructure improvement program and projected benefits from its Enable Midstream Partners, formed in 2013 as a joint venture between CenterPoint, OGE Energy and ArcLight Capital Partners. The company has a 55.4% limited partner interest and a 50% general partner interest in Enable Midstream Partners. The limited partnership is jointly controlled with OGE Energy.

Overall, Argus believes that CenterPoint is committed to optimizing the value of its portfolio of regulated utility and nonregulated pipeline, processing and storage businesses, and that it has the potential to generate total returns for shareholders of 8% to 9% annually over the next four to five years.

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The company has across-the-board operating efficiencies and, assuming economic conditions continue to improve, Argus expects it to invest its cash in nonregulated energy-related assets that have the potential for higher long-term returns. In the absence of attractive acquisition candidates, however, the company is likely to repurchase shares or pay down long-term debt. Argus believes that the company also benefits from positive relations with regulators at both the state and federal levels.

The firm thinks that the company’s overall financial and operating outlook remains strong based on past favorable rate case decisions and management’s demonstrated execution ability. Also Argus expects lower interest expenses beginning in early 2016 and continued improvement in the balance sheet. However, the company lowered its 2015 earnings per share (EPS) estimate to $1.07 from $1.10, and its 2016 EPS estimate to $1.15 from $1.20.

The company has some favorable factors such as its limited risk profile, visible forward earnings stream, growing dividend and attractive integrated structure. Additionally, CenterPoint continues to add new customers, despite some remaining weakness in its service area economy, and remains focused on keeping operations and maintenance expenses in check. Finally, assuming higher oil and natural gas prices by the second half of 2016, Argus believes the formation of Enable Midstream Partners is a strong plus.

Shares of CenterPoint were down 2.8% at $18.10 on Tuesday. The stock has a consensus analyst price target of $21.77 and a 52-week trading range of $17.72 to $25.56.

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