DTE Energy, NiSource, CMS Energy raised to Buy at UBS
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DTE Energy (NYSE:DTE), NiSource (NYSE:NI) and CMS Energy (NYSE:CMS) were upgraded Tuesday to Buy from Neutral at UBS, which advocates a narrow exposure to utilities and recommends slowly building positions based on the potential for sustained growth from the IRA-driven capital cycle.
UBS said DTE Energy (DTE) has overly discounted a weak outcome in the last Michigan rate case in a jurisdiction that still places the utility in the top quartile for regulatory ranking.
NiSource (NI) has several catalysts upcoming with the sale of the NIPSCO minority interest and a potential for a positive capex revision around renewable generation projects; the bank also likes the continued focus on cost management, and a steep decline in natural gas prices YTD will help minimize bill pressure to customers.
Public Service Enterprise Group (PEG) is rated Buy as a low-risk company that does not have material rate case risk in 2023, and UBS believes the GSMP III outcome could push the stock higher within the 6%-7.5% rate base growth range.
Among regulated utilities, UBS also rates Exelon (EXC) and Sempra (SRE) at Buy, while downgrading American Electric Power (AEP) and CenterPoint Energy (CNP) to Neutral from Buy.
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Financial and valuation comparison to sector peers
Analysis: DTE Energy: Grid Modernization Creating Margin Expansion
Stock price return: Down 6.5% YTD, down 17% in the past 12 months