Utilities stocks were in the spotlight today after Goldman Sachs analysts, typically bearish on utility stocks, identified several promising companies in the sector. The report maintains that much of the sector remains overvalued and continues to “face headwinds on the expected rise in interest rates,” but the firm highlighted several corporations that could continue to make improve their share prices over the coming quarter. Looking into these selections, as well as other possibilities within utilities, there were a number of investment opportunities that continue to look appealing.
Public Service Enterprise Group (PEG)
PEG is an attractive value option within utilities with a healthy balance sheet and a cash flow situation that continues to improve. A holding company operating through three principal direct wholly owned subsidiaries: PSEG Power LLC (Power), Public Service Electric and Gas Company (PSE&G) and PSEG Energy Holdings LLC, the diversified company has been steadily gaining strength. Today, Goldman upgraded the stock from Neutral to Buy and while raising their price target from $33 to $35. Among the reasons for the upgrade were a 10 or more percent discount on 2013E P/E multiples.
PPL Corporation (PPL)
PPL Corporation, with a massive market capitalization of $15.65B dollars, proved itself less volatile than the rest of the marker. According to their most recent quarterly report stock, the net income per share (EPS) is 2.4; P/E of 11.32. The Allentown based energy and utility holding company focuses on generating electricity from power plants in the northeastern, northwestern and southeastern the United States and markets wholesale or retail energy in the United State and United Kingdom. Shares have proven stable, with a 52 week high of $ 28.38 and a 52 week low of $ 24.10 with average volumes of shares traded daily are 5.24M. Earnings are expected to continue to improve, with Q3 exceeding the predicted earnings of Q2. Judging by its past performance, PPL looks like a solid anchor stock to have in a portfolio, unlikely to be the victim of a major sell-off.
Xcel Energy Inc. (XCJ)
Xcel Energy Xcel Energy Inc. is a holding company with subsidiaries engaged in the utility business. Similar to many utilities stocks, has exhibited considerable strength this year, up over 16 percent in the past 52-weeks. Share prices are still relatively high and consideration of this stock would perhaps be best following upcoming Q2 results. With a market cap of $11.6 Billion a P/E ratio of around 14.4, and dividends of $1.04 or 4.30 percent, Xcel appears to be somewhat undervalued. With second quarter results smaller than the previous quarter though, share prices still have the potential to slide before Quarter 3 when analysts expect renewed strength.
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