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What’s the Outlook for Nuclear Power Utility Stocks?

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Analysts’ recommendations

Among the four utility stocks under consideration in this series, FirstEnergy (FE) seems to offer the highest possible upside given analysts’ price targets. Analysts have given FE a consensus price target of $33.47, compared to its current price of $29.66. This difference indicates a potential upside of nearly 13% for the stock.

Analysts have given Exelon (EXC) a price target of $39.26, a potential rise of 10% compared to its current price of $35.72.

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The chart above shows analysts’ most recent ratings for utilities stocks.

According to Wall Street analysts’ estimates, Entergy (ETR) has a price target of $78.88, indicating a potential gain of 5.1% compared to its current price of $75.0.

Dominion Energy (D) is currently trading at $76.11. It has a price target of $79.44, which suggests a potential rise of 4.4% going forward.

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Outlook

Natural gas prices aren’t expected to rise significantly anytime soon, so natural gas could continue to hold a major position in terms of US power generation. 

However, according to the EIA (U.S. Energy Information Administration), the surge in gas prices during 2H16 could bring coal back to the top in terms generation mix in 2017. Nuclear generation could remain under pressure without state help due to its higher construction, operation, and maintenance costs.

Though the financial aid that utilities are seeking for nuclear power generation is much lower than what renewables are receiving right now, the road ahead for nuclear power is expected to be thorny. From an environmental perspective, if nuclear capacities fall, carbon emissions from the power sector could rise significantly in the long term.

You can learn more about US utilities (XLU) and how the industry works in Powering Up: All You Need to Know about Utilities.

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