FRANKFURT (dpa-AFX) - The French analyst firm Kepler Cheuvreux updated its list of favorites for the utilities sector in a sector study on Wednesday. Eon was added to the list of "Most Preferred Stocks" for 2024. Iberdrola also replaced Endesa on the list. Both stocks complement the already established list members Enel, Engie and Veolia.

Utilities are currently benefiting from a significantly improved sector environment following last year's energy crisis, according to a sector study published on Wednesday by a team of analysts led by Ingo Becker, who is responsible for Eon. This is supported by price and margin developments, but also by competitive and regulatory conditions. In 2023, industry values were only held back by concerns that investments in growth might not be as worthwhile as hoped. A sector premium has therefore become a sector discount.

Now it is actually tempting to bet on growth stocks in the energy sector again. However, the experts consider these to be less attractive than they appear. They continue to favor securities of integrated groups such as Enel and Engie or stocks that have individual strengths. They continue to include the utility company Veolia.

They see Eon as a rare opportunity to benefit from the cycle of increasing grid investments in Europe. Iberdrola could be a particularly good bet for infrastructure development in times of the energy transition.

The five shares selected by the experts all offer attractive dividend yields, which in the case of Enel and Engie are as high as eight percent. The other three shares would yield around five percent plus the structural growth they each have to offer. Although not on the shortlist, Fortum was also mentioned because of its particularly high dividend.

Kepler Cheuvreux's least valued stocks remain the power plant operator Uniper and the Spanish energy company Naturgy as well as the newly added Italian utility Terna. The experts criticized the latter's high valuation combined with a relatively weak dividend. With regard to Uniper, they said that the market capitalization had become detached from the fundamental value of the company.

There were no changes to the ratings for the companies mentioned. The favored stocks are all rated as "buy", in the case of Eon with a price target of EUR 15, which is a quarter above the current price. Analyst Ingo Becker is convinced that the share will reach this price target in the coming year. The vote for the three "Least Preferred Stocks" is "Reduce" in each case.

According to the "Buy" rating, Kepler Cheuvreux expects the share to have an absolute upside potential of at least 10 percent over the next twelve months. According to the "Reduce" rating, the institute sees an absolute downside risk./tih/ag/mis

Analyzing institute Kepler Cheuvreux.

Publication of the original study: 29.11.2023 / Time not specified in study / Time zone not specified in study

First dissemination of the original study: 29.11.2023 / time not specified in study / time zone not specified in study