Analyst Looks More Positive on Utilities (AEP, DUK, EXC, PCG, PEG, UTL, XEL, ED, FPL, PNW, PGN, SCG, SO, IDU)

Douglas A. McIntyre

Oppenheimer is making a new call in the utility sector.  It looks a bit mixed between positive and somewhat cautious calls this morning, but it is important to note that many of these utilities are still in the lower half of the trading range of their last 52-weeks and some are significantly off of highs.

The new OUTPERFORM rated stocks are American Electric Power Co., Inc. (NYSE: AEP), Duke Energy Corporation (NYSE: DUK), Exelon Corporation (NYSE: EXC), PG&E Corp. (NYSE: PCG), Public Service Enterprise Group Inc. (NYSE: PEG), UNITIL Corporation (NYSE: UTL), Xcel Energy Inc. (NYSE: XEL).

The new more cautious PERFORM rated stocks are Consolidated Edison Inc. (NYSE: ED), FPL Group Inc. (NYSE: FPL), Pinnacle West Capital Corp. (NYSE: PNW), Progress Energy Inc. (NYSE: PGN), SCANA Corp. (NYSE: SCG), and Southern Company (NYSE: SO).

There are others that may not be included in the list today, but this is a brief summary from early this morning.  To show how the lot of utilities has performed, we looked at the iShares Dow Jones US Utilities (NYSE: IDU) ETF that tracks the sector. It closed at $67.25 yesterday, and its 52-week range is $53.15 to $100.98.

While the number of houses being foreclosed or are vacant has stayed high, that should start to abate over the next six months.  And if the economy’s green shoots start to turn into some small visible growth toward the end of the year or into next year, then the power consumption from major corporate and industrial clients should start to pick back up as well.

Many of these utilities have also underperformed in the ‘defensive stocks’ category.  This recession led to enough home foreclosures and power reduction from the industrial and manufacturing sector that it took out at least some of the stability or safe harbor characteristics of the past.  It looks like Oppenheimer expects this to improve at least some from here on out.

Jon C. Ogg