TD launches utilities sector with Vistra, PG&E top picks

TD Cowen analyst Shelby Tucker initiated coverage of the U.S. power and utilities sector with Vistra (VST) and PG&E (PCG) named top picks. Accelerated demand for electricity from data centers and the need to upgrade utility assets create a “once in a generation opportunity” for electric utilities, the analyst tells investors in a research note. TD expects power prices to remain elevated in deregulated markets. The firm says this level of demand for electricity in the U.S. has not been seen since the end of World War II, which should drive near double-digit rate base growth, supporting 7%-9% earnings growth for the “foreseeable future.” Integrated utilities with “constructive regulation” will see the greatest opportunity for adding generation assets over time, TD contends. Along with Vistra and PG&E, the firm’s other Buy rated names are American Electric (AEP), Duke Energy (DUK), Edison International (EIX), NextEra Energy (NEE), PSEG (PEG), Southern Company (SO) and Xcel Energy (XEL). TD put Hold ratings on Atmos Energy (ATO), American Water (AWK), Eversource (ES), Exelon (EXC), MDU Resources (MDU), Pinnacle West (PNW) and WEC Energy (WEC).