EXC, AEE, and PPL: Analyzing Their Current Valuations

Valuation

Many utility stocks seem to be trading at a large premium compared to the industry average. One of the top gainers, Exelon’s (EXC), stock is trading at 16 times its forward earnings at the moment, lower than peers’ average. Its five-year historical average is around 18x. Exelon has rallied more than 25% over the past 12 months. Exelon stock is trading at a dividend yield of 2.9%, marginally lower than peers’ average.

EXC, AEE, and PPL: Analyzing Their Current Valuations

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What’s next for utilities?

Ameren Corporation (AEE) is also one of the most rallying stocks among utilities. It has soared ~23% in the last year. It’s trading at 22 times its forward earnings, far higher than its historical average valuation. AEE offers a yield of 2.6%. AEE’s lower yield and expected slower earnings growth don’t seem to justify its premium valuation.

PPL stock is trading at 12.5x its forward earnings—far lower than peers’ average valuation of 17x–18x. PPL’s historical average valuation is close to 14x. The stock appears to be at a notable discount compared to its peers. PPL stock currently offers a yield of 5.3%, which is significantly higher than utilities’ (XLU) average of 3.1%. Along with PPL’s reasonable expected earnings growth, its premium yield makes it stand tall among peers.

Broader utilities appear to be trading at a premium compared to broader markets. Valuation concerns might act as an obstacle for utility stocks’ (XLU) rally.