Barclays’ new utilities ratings favor PG&E, Duke Energy, AEP, and Pinnacle West

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Barclays has initiated coverage of 26 stocks in the U.S. power and utilities sector, stating that it is too early to be bullish on the industry but there are positive aspects to consider. Analyst Nicholas Campanella believes that the sector stands to benefit from decarbonization strategies, electrification, and the rise of electric vehicles. He also emphasized the industry’s robust capital spending trajectory, driven in part by the Inflation Reduction Act. Barclays has identified several top-rated names, including PG&E, Duke Energy, American Electric Power, and Pinnacle West Capital.

In terms of diversified utilities, Barclays expressed bullishness towards AES Corp. and Sempra. At the small-cap level, OGE Energy was rated as overweight, while NorthWestern was rated as underweight. Barclays is also optimistic about DTE Energy due to regulatory de-risking through the second half of 2023. However, it remains cautious on CenterPoint Energy and WEC Energy, which have high leverage profiles and breadth of general rate case exposure relative to their respective price-to-earnings premiums. Other companies that received overweight ratings from Barclays include Exelon and PSEG, while several others were given equal weight ratings.

Overall, Barclays’ coverage of the U.S. power and utilities sector highlights the potential long-term benefits of decarbonization, electrification, and electric vehicles. Although the bank is not yet bullish on the industry as a whole, its positive view on certain stocks reflects confidence in their growth prospects. The sector’s capital spending trajectory and regulatory de-risking are also factors contributing to Barclays’ favorable outlook on selected companies within the sector.

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