Key insights
- Scotiabank notes North American regulated utility stocks are underperforming due to lagging EPS growth, affordability concerns, and rising interest expenses. Despite strong demand, these headwinds are pressuring the sector. While specific US utility stocks are highlighted as picks, the overall sector sentiment is cautious, suggesting potential for continued weakness or a lag behind broader market gains. This indicates a bearish outlook for the utility sector's near-term performance relative to the market.
Investing.com - Scotiabank said North American regulated utility stocks have underperformed the broader market despite strong demand trends and regulatory setups, with the S&P Utilities index lagging in eight of the past nine weeks.
The firm said utility stocks have underperformed the market by 25% over the past nine weeks and by 20% over the past 13 weeks since the Iran war began. The S&P Utilities index has lagged in ten of the past 13 weeks during that period.
Scotiabank cited four reasons for utility stock weakness. The firm said earnings per share growth is robust but meaningfully lags the broader market, and near-zero betas provide downside protection but are not favored in the current environment.
The firm said affordability concerns are top of mind and could weigh on growth outlooks for some utilities. Rising interest expenses add to bill pressures and create earnings per share headwinds, Scotiabank said.
Scotiabank said its top picks of regulated utilities in the United States remain NYSE:WEC, NYSE:ETR, NYSE:CMS, NYSE:CNP, NYSE:BKH, NYSE:NEE, NYSE:DUK, and NYSE:FE. WEC Energy Group, trading at $108.60 with a market cap of $35.37 billion, offers a 3.51% dividend yield and has raised its dividend for 22 consecutive years. According to InvestingPro analysis, WEC appears undervalued at current levels despite trading near its 52-week low, with additional insights available through the platform’s comprehensive Pro Research Report. The firm said NYSE:ES is its least favorite, while TSE:ALA, TSE:EMA and TSE:AQN are its favorites in Canada.
In other recent news, WEC Energy Group reported first-quarter earnings for 2026 that surpassed Wall Street expectations. The company achieved an earnings per share of $2.45, exceeding the projected $2.09, which represents a 17.22% positive surprise. Revenue also outperformed estimates, totaling $3.4 billion compared to the expected $3.37 billion. These results highlight a strong start to the year for WEC Energy Group. Additionally, shareholders recently voted at the company’s annual meeting, electing all twelve board nominees to serve terms expiring in 2027. The directors elected include Warner L. Baxter, Ave M. Bie, and Danny L. Cunningham, among others. Each nominee received more votes in favor than against, indicating shareholder support for the current board.
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