The US utility with the second-highest expected upside is the competitive utility FirstEnergy (FE). FE has an estimated upside of 16%, with a price target of $33.53, as compared to its current market price of $28.91.
Among the 19 analysts tracking FirstEnergy, 12 have recommended the stock as a “hold,” while four have recommended it as a “buy,” and one has recommended a “strong buy.” Two analysts have recommended a “strong sell” for the stock as of June 26, 2016.
A few hybrid utility stocks are currently offering attractive potential upsides compared to utilities at large (XLU). Public Service Enterprise Group (PEG) has a price target of $47.13, as compared to its current price of $44.04, implying a gain of 7%. Peer Entergy (ETR) is currently trading at a market price of $78.99. According to Wall Street analysts, ETR has a price target of $78.69, which shows a potential fall of 0.4%.
Hybrid utility FirstEnergy (FE) had previously been performing poorly. Lower natural gas prices had been hampering wholesale power prices, which eventually hampered FE’s earnings.
That interim revival
Meanwhile, the interim revival in natural gas prices was unable to uplift wholesale power prices. Consequently, higher electricity demand might now be the only thing that can revive utility earnings.
However, due to various energy efficiency initiatives, a significant increase in power demand looks unlikely right now. FirstEnergy plans to become a pure-play regulated utility over the next few years, which could bode well for its long-term earnings growth.