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“It’s too soon to be bullish” on the U.S. power and utilities sector (NYSEARCA:XLU), but there is “plenty to like” across value large-caps, Barclays said Wednesday in initiating coverage of 26 stocks in the group with a neutral view on the industry.
Barclays analyst Nicholas Campanella believes the sector “should benefit long term from decarbonization strategies, electrification and electric vehicles, and a capital spending trajectory that has only grown more robust due to the Inflation Reduction Act.”
The bank said its best-positioned Overweight-rated names are PG&E (PCG), Duke Energy (DUK), American Electric Power (AEP) and Pinnacle West Capital (PNW).
Among diversified utilities, Barclays is most bullish on AES Corp. (AES) and Sempra (SRE).
At the small-cap level, Barclays rated OGE Energy (OGE) at Overweight and NorthWestern (NWE) at Underweight.
Barclays is bullish on DTE Energy (DTE) due to regulatory de-risking through H2 2023, and cautious on Underweight-rated CenterPoint Energy (CNP) and WEC Energy (WEC) given their leverage profiles and breadth of general rate case exposure relative to their respective P/E premiums, currently at sector highs.
Also rated Overweight: Exelon (EXC), PSEG (PEG).
Rated Equal Weight: Ameren (AEE), Atmos Energy (ATO), CMS Energy (CMS), Consolidated Edison (ED), Dominion Energy (D), Edison International (EIX), Entergy (ETR), Evergy (EVRG), Eversource Energy (ES), FirstEnergy (FE), Portland General Electric (POR), PPL Corp. (PPL), Southern Co. (SO)