Energy, Utilities & Mining Pulse: Investors Asking: What Is One High Conviction Theme and Stock Call As We Position for 3Q26?

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Energy, Utilities & Mining Pulse: Investors Asking: What Is One High Conviction Theme and Stock Call As We Position for 3Q26?

the next quarter in power/utilities. For

the IPPs, we believe we will see tailwinds for the sector from rising power prices and

improved clarity on the regulatory outlook to drive more PPAs to get signed in the space,

which we think will both contribute to positive estimate revisions. For the regulated

utilities, we continue to see potential for positive revisions to capital plans and earnings

(XEL, DUK, SRE) to support the growth in power demand, but we are mindful of areas

like PJM (EXC) where affordability is highly in focus and markets where we are seeing

heightened pushback to the buildout of power/data center infrastructure that could

potentially limit the upside potential around capex.

E&P:

We highlight Buy rated DVN on the back of our reinstatement of coverage on the stock

published earlier this week (linked here), as we see an attractive entry point to this name

with shares currently trading at a 15% average FCF yield on our 2027/2028 estimates

relative to large cap E&P peer average of 11% (peers include OXY, COP, FANG, EOG). We

believe DVN has a rich catalyst pathway ahead in 2H26/2027 which includes the

potential for incremental clarity from management around the pro forma portfolio

outlook given recent management commentary and DVN’s updated 2026 outlook,

potential for further A&D activity, and progress towards the $1.0 bn merger synergy

target by YE2027. DVN continues to emphasize a prioritization in optimizing its

Delaware Basin asset within the broader portfolio, as the company recently acquired

16.3k undeveloped acres in the Delaware Basin for $2.6 bn in a federal lease sale,