Seeking Alpha

Goldman begins to warm on utility sector

  • The sector may be ready to be a defensive favorite again, writes analyst Michael Lapides, as declines have left utilities trading at 13.5x-14x 2015 EPS estimates, inline or even slightly below the average of the past 5-10 years.
  • It's a tepid endorsement and Lapides and team aren't yet ready to turn bullish on the overall sector, but did raise ConEd (ED +0.1%) to a Buy while removing NRG Energy (NRG -2.4%) from Goldman's Conviction Buy list. After underperforming NRG by 12% YTD, Calpine (CPN -1.9%) now represents Goldman's preferred way to get exposure to the tight Texas power market.
  • Other favorites include NextEra Energy (NEE +1%) and American Water Works (AWK +0.5%).
  • Utility ETFs: IDU, PUI, XLU, VPU, RYU, FXU, PSCU, UPW, SDP, UTLT.
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