Investing.com -- Jefferies analysts have revised their outlook for major European utilities, upgrading Iberdrola (OTC:IBDRY) and SSE (LON:SSE) to "buy" while downgrading Engie (EPA:ENGIE) to "hold."
The revisions reflect a reassessment of the risk-reward dynamics within the utilities sector as the financial year 2025 approaches.
Iberdrola has been elevated to a "buy" rating, with the price target raised by 17% to €15. This company boasts a decade of strong financial performance, consistently reporting high single-digit annual growth in both earnings and dividends.
This positive trend is anticipated to persist. Jefferies highlights the company's emphasis on grid investments, which are projected to contribute significantly to its profitability over the next two years.
This clear growth trajectory, coupled with promising prospects in the European data center market, reinforces a positive outlook for the company.
Similarly, SSE has been upgraded although its price target was reduced slightly by 6% to 1,930p.
Jefferies flagged the undervaluation of SSE stock, which has lagged behind the European utilities index by 10% in recent months.
The brokerage noted SSE's strong position in the UK’s regulated grids market, bolstered by increasing offshore wind infrastructure investments.
Analysts also observed reduced execution risks in major projects such as Dogger Bank, making the stock a compelling choice despite balance sheet concerns that appear manageable.
In contrast, Engie was downgraded to "hold," with its price target cut by 11% to €16.60. Jefferies pointed to limited growth catalysts, particularly in light of ongoing political uncertainties in France and challenges in Engie Brasil.
Additionally, Engie’s heavy reliance on renewable investments was viewed as less favorable in the current market environment, where grid-focused strategies offer higher stability and returns.