- Utilities stocks (XLU +0.8%) may have exhausted their positive momentum, Goldman Sachs (NYSE:GS) says as it downgrades the sector to Cautious from Neutral and says valuation is becoming a concern.
- Absolute P/E ratios in the utility sector are back at peak cyclical levels and relative valuation metrics compared to the rest of the S&P 500 are also near peak levels but earnings growth appears relatively typical, the firm says.
- Among specific stocks, Goldman downgrades both Ameren (AEE +1%) and WEC Energy (WEC +0.4%) to Sell from Neutral, primarily about the companies’ ability to meet earnings expectations especially in 2019, and American Electric Power (AEP +0.6%) to Neutral from Buy.
- But Goldman upgrades Duke Energy (DUK +1%) to Buy from Neutral with an $85 price target, citing DUK's relative valuations plus strategic actions that have shifted the company toward a stable regulatory infrastructure business as rate case filings and continued O&M cost management should ease North Caroline regulatory woes; the firm also upgrades PPL Corp. (PPL +1.3%) to Hold from Sell.
- In addition to DUK, Goldman has Buy ratings on FirstEnergy (FE +4.1%), Public Service Enterprise (PEG +1.4%) and PG&E (PCG +0.2%).
- Now read: Duke And Its Relative Valuation
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