Morgan Stanley Upgrades Regulated Utilities Sector; Dynegy Is Top Pick, Laclede, Pinnacle West Downgraded

In a new report, Morgan Stanley analyst Stephen Byrd upgraded the Regulated Utilities industry from Cautious to In-Line.

“For 2016, we are focused on utilities with above-average EPS growth driven by strong infrastructure spend, as well as select merchant power stocks with very strong cash flow profiles,” Byrd explains.
 

Byrd believes that the market continues to undervalue growth and believes it will better differentiate high-growth names from others in 2016. In addition, he predicts that the valuation gap between undervalued public companies and overvalued private companies will begin to close.
 

Related Link: Deutsche Bank Says $55 Oil Predicted Weeks Ago Now Seems Unreasonable
 

Morgan Stanley names Dynergy Inc. DYN its top overall pick in the space, but also remains Overweight on NRG Energy Inc NRG and Calpine Corporation CPN. The firm maintains its Underweight rating on Consolidated Edison, Inc. ED, Southern Co SO and Public Service Enterprise Group Inc. PEG.

In addition, Morgan Stanley has downgraded Laclede Group Inc LG and Pinnacle West Capital Corporation PNW from Equal-Weight to Underweight.

Disclosure: the author holds no position in the stocks mentioned.