Utility price targets
According to the Wall Street analyst consensus, Southern Company (SO) stock has a price target of $50.82, compared with its current market price of $48.55. This implies an estimated upside of 4% going forward.
Credit Suisse upgraded SO’s rating from “underperform” to “neutral” on August 3, 2017. It also modified its price target from $49.0 to $50.0.
FirstEnergy (FE) has a relatively higher potential upside than its peers. It has a price target of $34.06, compared with its current market price of $31.61, indicating a potential gain of ~8%.
Entergy (ETR) currently offers an estimated gain of 3%, with a price target of $79.06. It’s now trading at $76.81.
Even though the three utilities under our consideration in this series are the highest-yielding utility stocks in the sector, their dividend profiles don’t look as attractive as those of peers. Still, SO looks to be the strongest among the three, with solid dividend payment history.
SO’s earnings are also relatively stable, which is of utmost importance for stable dividends. Notably, SO’s delayed power plants could continue to dent its earnings in the future. But at this moment, its dividend growth seems well placed, regardless of these issues.
FirstEnergy and Entergy
On the other hand, FirstEnergy and Entergy might continue to struggle with their competitive operations. This could negatively affect their total earnings growth and, ultimately, their dividend growth going forward.
You can read about how cheaper natural gas has been negatively affecting US utilities with higher nuclear generation in Market Realist’s series How Nuclear Generation Utilities Have Performed Recently.