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Analysts’ Top 5 Favorite S&P 500 Utilities Stocks

PART:
1 2 3 4 5 6 7 8 9 10 11
Part 4
Analysts’ Top 5 Favorite S&P 500 Utilities Stocks PART 4 OF 11

NextEra Energy: Analysts’ Ratings and Price Targets

NextEra Energy

NextEra Energy (NEE), the largest constituent of the S&P 500 Utilities Index, has an implied gain of approximately 5.0% from its mean price target of $155.57. It’s currently trading at $148.57.

Of the 16 analysts tracking NextEra Energy, four have rated it a “strong buy,” while ten have rated it a “buy.” Two analysts have recommended a “hold.” None of the analysts have rated the stock a “sell” as of October 5, 2017.

NextEra Energy: Analysts&#8217; Ratings and Price Targets

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Peer price targets

Analysts’ mean price target for Southern Company (SO) is $51.38, indicating a potential rise of nearly 5.0%. It’s currently trading at $49.10.

North Carolina’s Duke Energy (DUK) has a mean price target of $85.93, implying a potential rise of only 2.0% against its current market price of $84.47.

Valuation

NextEra Energy stock is currently trading at an EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) valuation multiple of 13.0x. It has a five-year historical average near 12.0x. The average EV-to-EBITDA multiple for utilities is 11.0x. So NEE seems to be trading at a fair premium to both its historical average and the industry average.

Southern Company is trading at a fairer valuation with an EV-to-EBITDA ratio of 11.2x. Duke Energy’s valuation multiple is 12.0x.

These top utility stocks appear to be trading at a premium, given their PE (price-to-earnings) multiples. NextEra Energy’s PE multiple is 18.0x, while Duke Energy’s is currently near 21.0x.

US utilities (XLU) witnessed a significant correction in the last few weeks. For more information, be sure to read Could Trump’s Tax Reform Hurt Utilities?

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