UTILITIES & CLEAN ENERGY : R-S-N-G at a Reasonable Price: EU Utilities Summer Outlook

Research evidence excerpt

UTILITIES & CLEAN ENERGY : R-S-N-G at a Reasonable Price: EU Utilities Summer Outlook

Refinitiv

2026 summer outlook update

We stay positive on European utilities for the balance of 2026. This continues the bullish

stance we took late last year in our 2026 year-ahead, but now in a dramatically changed

geopolitical and macro environment. We argued back then that grid compounders and

exposure to rising power demand via peak (gas) generation would sustain above-trend

EPS growth, and that the sector at the time was still cheap. Since then, the SX6P is up

15%, the sum of a 3% positive revision to aggregate FY27 EPS consensus and a 12%

expansion in sector P/E. That makes the valuation setup different now, on top of the

changed external backdrop, requiring different positioning within the sector, in our view.

Therefore, in this note we reshuffle our top picks and sector preferences, as well as

changing a couple of recommendations:

– We become more positive on integrated utilities and renewables as “R-S-N-G” –

Renewables, Storage, Nuclear and Grids – capex grows, and although we maintain our

positive view on grids, we favour them less in relative terms than we did late last year.

– We don’t think the sector is expensive overall and note that it is down since the start

of the Iran conflict despite positive implications for electrification. But we nonetheless

become more sensitive to valuation after strong performance of the sector YTD. This

drives our downgrade of RWE to Neutral and leads us to take networks companies like

E.On and Elia out of our top picks.

Figure 1: Sector outperformed in Jan/Feb but is actually down since the start of

the Iran conflict despite clear positives for the electrification outlook

Indexed relative performance of Utilities vs. Stoxx 600