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Executive Summary

Utilities Re-Rating in Progress

By Roger S. Conrad on Dec. 11, 2023

There’s just three weeks left until New Year’s Eve. And the Dow Jones Utility Average is still down –6.2 percent in 2023. That leaves the sector on track for its worst performance since 2008, barring a powerful end-year rally,—though that year’s -27.8 percent demolishing is in a whole different league.

Since early October, however, the DJUA is up 11.5 percent, topping even the robust returns from the S&P 500 and the big technology stock Nasdaq 100. And the biggest winners the past two months have been the stocks that were beaten up the most through September, for example AES Corp (NYSE: AES) with an 60 percent-plus return.

My view: We’re in the early stages of a utility sector re-rating and stock price recovery.

At the core of the comeback is the resilience of companies’ earnings and CAPEX-led growth plans. The Q3 results and guidance updates I highlighted last month and in the current Utility Report Card clearly show companies are finding ways to stay on track, despite the headwinds of higher interest rates and affordability concerns. And that underlying strength was further on display in presentations delivered by company managements at the annual Edison Electric Institute Financial Conference in mid-November.

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