Brean Capital's Top 4 Utility Stocks

In a recent report on the utilities sector, Brean Capital discussed their top utility stock picks in the fields of water utilities, electric/gas utilities, flow technology and clean energy.

Water Utilities: American Water Works Company Inc AWK

Brean sees improving fundamentals at American Water Works. Despite the improvements, analysts note that the stock is undervalued compared to its closest peer, Aqua America Inc WTR. Analysts point out that the American Water Works has a healthy 2.3 percent dividend for a utility stock.

Electric/Gas Utilities: South Jersey Industries Inc SJI

According to Brean analysts, South Jersey Industries has the most upside of any gas and electric utility stock they cover. Analysts believe that many aspects of the company’s operations are not fully priced into the stock, including its roles in the PennEast pipeline project, CNG refueling stations, liquefaction operations and its solar investment.

Flow Technology: Xylem Inc XYL

Analysts predict that Xylem will continue to use its free cash flow to make strategic water technology acquisitions, targeting companies that will contribute to strong future growth. In addition, Brean analysts believe that the stock is currently undervalued compared to its peers, and they believe that valuation gap will soon shrink.

Clean Energy: First Solar, Inc. FSLR

Brean analysts disagree with the recent trend in the market favoring distributed generation over utility scale. Their analysis indicates strong end-market demand for utility scale that suggests that First Solar stock is extremely undervalued at current levels. Analysts believe that First Solar is well-positioned for long-term growth and recommend accumulating shares of the stock.