The utilities sector should be one of the larger beneficiaries of lower interest rates. Now that the Federal Reserve has taken 50 basis points out of the Fed Funds rate, and with more rate cuts expected ahead, all utilities which are strong borrowers of capital should do better financially. After all, water, gas and electric utilities are generally very dependent upon the capital markets to issue bonds and notes that finance their capital-intensive operations. These also fund those high-yielding dividends that are so typical for utilities stocks, and those yields are back in serious competition with Treasury yields now that long-term rates came down ahead of the FOMC interest rate cut.
Oggonomics has featured water and electric utilities that would benefit from lower interest rates. Now we have seen multiple analysts issue multiple reports with new coverage and upgrades in the utilities sector since rates were cut. It looks like even the Hold and Neutral ratings are still by and large looking for at least some upside in the share prices – plus all utilities are generally known for their dividends. That is why this is now looking “strategic” by nature — and the calls are from multiple analysts.
This is certainly not all of the utilities given coverage updates in the last 24 hours, but it will give you an idea of the overall expectations for trends ahead. As a reminder, no analyst report should ever be your sole reason for buying or selling a stock. The responsibility of any decision to buy or sell is on the individual investor and that decision should be made with a financial advisor.
and those capital equipment and services players in water should see a large financial benefit. And they likely will not have to lower prices at all.
Ameren Corporation (NYSE: AEE) was started with a Buy rating and was assigned a $97 price target at Jefferies. Ameren was last seen at $84.00 with just over a 3.2% dividend yield.
American Electric Power Company, Inc. (NYSE: AEP) was also started with a Hold rating and assigned a $107 price target at Jefferies. AEP was last seen at $101.50 and it has a 3.45% yield.
American Water Works Inc. (NYSE: AWK) was reinstated as Underperform but its prior $140 price objective was raised to $149 at BofA Securities, noting that the relative P/E valuation versus peers is unjustified. American Water Works was last seen down 1.5% at $146.75 and its dividend yield is 2.05%.
Consolidated Edison, Inc. (NYSE: ED) was last seen trading at $102.50 with a 3.25% yield. UBS raised ConEd’s price target to $106 from $105 while maintaining its Neutral rating.
Dominion Energy, Inc. (NYSE: D) was started with a Hold rating and was assigned a $58 price target at Jefferies. Dominion was last seen at $57.50 with a 4.6% dividend yield.
Duke Energy Corporation (NYSE: DUK) was started with a Buy rating and was assigned a $138 price target at Jefferies. Duke Energy was last seen at $115.50 with a 3.6% dividend yield.
Entergy Corporation (NYSE: ETR) was last seen trading up about 1% at $129.00 with a 3.5% dividend yield. UBS raised Entergy’s stock rating to Buy from Neutral and the firm raised its price target to $144 from $143.
Essential Utilities, Inc. (NYSE: WTRG) was reinstated with a Buy rating Buy (previously Neutral) with a $45 price objective (versus $38.32 prior close) at BofA Securities, noting that the conglomerate discount for its water and gas utilities is a discount that has gone too far. WTRG was last seen at $37.85 and it has a 3.4% dividend yield.
Evergy, Inc. (NASDAQ: EVRG) was last seen trading at $61.00 with a 4.2% dividend yield. Evergy was started with a Buy rating and a $70 price target at Jefferies.
Exelon Corporation (NYSE: EXC) was last seen trading up about 2% at $40.25 with nearly a 3.9% dividend yield. Exelon was maintained as a Neutral at UBS but its price target was raised to $43 from $40 in the call. Jefferies started coverage of Exelon with a Buy rating and a $46 price target.
FirstEnergy Corporation (NYSE: FE) was raised to Buy from Hold at Argus, and the independent research firm set its price target at $50. The call is as the utility is now moving beyond its past scandal as it reached settlements with state prosecutors in August and with the SEC in September. First Energy was last seen at $43.25 and it now has a 3.9% dividend yield.
OGE Energy (NYSE: OGE) was started with a Buy rating and a $46 price target at Jefferies. OGE was last seen at $40.20 with a 4.2% dividend yield.
Pinnacle West Capital Corporation (NYSE: PNW) was started with a Buy rating and was assigned a $104 price target at Jefferies. PNW was last seen trading at $89.50 with a 3.95% dividend yield.
Portland General Electric Company (NYSE: POR) was started with a Hold rating and was assigned a $48 price target at Jefferies. POR was last seen at $48.50 with a 4.2% dividend yield.
PPL Corp. (NYSE: PPL) was last seen at $32.00 with a 3.25% dividend yield. Jefferies started PPL with a Buy rating and it assigned a $38 price target.
SJW Group (NYSE: SJW) was started with a Neutral rating and with a $65 price objective (versus $59.97 prior close) at BofA Securities. The form San Jose Water was last seen at $58.50 and it has a 2.6% dividend yield.
The Southern Company (NYSE: SO) was maintained as Neutral at UBS, but the firm did still raise its price target to $91 from $90 in the call. Southern was also started with a Hold rating and assigned a $94 price target at Jefferies. Southern was last seen at $88.86, with a 52-week range of $61.56 to $90.34 and it has a 3.2% dividend yield.
Xcel Energy Inc. (NYSE: XEL) was started with a Hold rating and was assigned a $70 price target at Jefferies. XEL was last seen at $64.50 with a 3.4% dividend yield.
