EXC - AES tops five utility stocks seen outperforming at Morgan Stanley

2023-03-29 14:56:28 ET

Morgan Stanley analysts forecast five utility stocks including AES Corp. ( AES ) and Exelon ( EXC ) will outperform after struggling in March , as the firm "remains overweight utilities," ( NYSEARCA: XLU ) UtilityDive.com reported Wednesday.

Demand for renewables remains high, and AES ( AES ) "has a robust pipeline," according to Stanley analysts, seeing 40%-plus upside potential for the stock over the next 12-18 months, adding they do not expect challenges with access to debt or tax equity capital to finance renewables projects.

DTE Energy ( DTE ) trades at a discount to its peers, but Stanley believes the gap is "unwarranted and will reverse," and expects a supportive rate decision from the Michigan Public Service Commission in Q4 will lift the company.

Exelon ( EXC ) has said it anticipates significant annual growth in its rate base, and Morgan Stanley said it sees a "clear path to achieving EPS results above the midpoint of the 6%-8% growth guidance."

Public Service Enterprise Group ( PEG ) offers "attractive upside looking at several angles," including the utility's nuclear business, and PPL Corp. ( PPL ) has a strong case to move forward with the planned closures and replacements of its Kentucky coal plants, along with no rate case risk through 2025, and a strong balance sheet, Morgan Stanley said.

PPL's ( PPL ) improved growth prospects have come at the cost of its near-term profitability and dividends, Junius reports in an analysis published on Seeking Alpha .

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