- With the Dow Jones Utility Average near all-time highs, Morgan Stanley analysts review their favorite major names with a focus on 2021 earnings power.
- Stanley believes the market under-appreciates the free cash flow generation of Exelon's (NYSE:EXC) merchant business, the segment's margin stability from contracted payments and potential Illinois legislation; similarly, it likes PSEG's (NYSE:PEG) merchant business, which generates $530M in levered annual free cash flows.
- The firm continues to favor NextEra Energy's (NYSE:NEE) "best-in-class utility," which it values at a 10% premium on 2021 earnings; all in, the company offers above average EPS growth of 6%-8% - and likely at the high end - through 2022.
- Stanley says FirstEnergy's (NYSE:FE) stronger than average EPS growth with lower than average risks should drive the stock to trade closer to peers.
- The firm also likes Atmos Energy (NYSE:ATO), whose premier regulated gas utility provides highly visible, low-risk and industry-leading EPS growth.
- Stanley analysts remain cautious on Consolidated Edison (NYSE:ED), ONE Gas (NYSE:OGS), Pinnacle West (NYSE:PNW), Southern Co. (NYSE:SO) and Spire (NYSE:SR).