The Utility Trader

Research evidence excerpt

The Utility Trader

Utilities

The Utility Trader July 5, 2026

Will the market ever take a hydration break? Ex. 1: 2026 GICs Sector

Perf.Utilities can’t keep up with rising market; IPPs are the culprit. The S&P Utilities

ended the first half up 6.2%, once again trailing the S&P 500 which rose 9.6%. Utilities

have trailed the market 6 of the past 7 years - hopefully we see a 2H comeback and

end this streak. An IPP rally will be key for this. IPPs kept utilities close to the market

in 2024-2025 but this year have turned into a big drag. In fact, we estimate Utilities

ex-IPPs are up 11% in the first half, beating the market. Add on the pullback in market

cap leader NEE on the D deal and it’s surprising the sector hasn’t done even worse.

What’s working? Utilities data center and growth leaders. While IPPs have been

weak, utilities data center leaders are tops in the sector on new data center deals,

capex upsides and upward earnings bias. ETR is #1 again followed by EVRG, AEP, Source: FactSet, Wolfe Research

DTE, LNT and NI. Other growthier utilities have also done well PNW, CNP, OGE Ex. 2: 2026 Utilities Perf.

and AEE. Many of these are midcaps which aligns with the S&P Midcap index

outperforming this year.

What’s not Working? IPPs, PJM utilities, Gas LDCs, CA utilities. IPPs are really

lagging this year with all the names underperforming and all but TLN in the red.

CEG’s 30% decline is especially impactful as the largest market cap IPP and was likely

exacerbated by the Calpine holder lock-up expiring 6/30. No one is winning in PJM

as the utilities PPL, PEG, EXC, FE, AWK have also suffered with political/regulatory

overhang spreading from NJ to PA. Gas LDCs collapsed the last few months with

no data center growth and less competitive EPS growth vs peer electrics. Finally, CA