OGS

ONE Gas, Inc.

88.28
USD
0.15%
88.28
USD
0.15%
62.52 92.26
52 weeks
52 weeks

Mkt Cap 4.72B

Shares Out 53.50M

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Entergy cut to Sell equivalent at Morgan Stanley on climate change risk

Morgan Stanley sees the risk-reward for select U.S. utilities as attractive relative to the broader market after significantly underperforming the S&P 500 last year, but it downgrades Entergy (ETR -2.0%) to Underweight from Equal Weight with a $106 price target, citing "concerns about customer bill pressure and negative regulatory responses to physical damage from climate changes." While Entergy offers some of the lowest utility rates in the U.S. and operates under favorable storm cost recovery mechanisms via securitization, Morgan Stanley's concern is that "as the frequency and magnitude of storm damages persists, the impact of the securitizations will become apparent in customer bills, which will inhibit longer-term capex plans and thus lower future EPS growth." In addition to Entergy, Morgan Stanley says several utility stocks face physical risk from climate change, most notably PCG, EIX, SRE, NEE, ED, ES, AGR and FE. A favorite utility at Morgan Stanley is Exelon (EXC -0.4%), which it believes will trade at a premium to peers given the above average growth rate and wires-only business model. Analysts at Mizuho cited uncertainty over the future of the Build Back Better legislative proposal in its recent downgrade of Exelon.

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