Morgan Stanley’s Most Preferred and Least Preferred European Utilities

This week Morgan Stanley upgraded several European Utilities to in-line from cautious “as fundamentals within the power and gas market improve, leverage is now more sustainable and earnings revisions have reached their nadir.”

The bank’s most preferred names in this sector are:

1.Company: Centrica (CPYYY)
Current Dividend Yield: 5.09%
Country: UK

2.Company: Energias de Portugal (EDPFY)
Current Dividend Yield: 7.37%

3.Company: E.ON AG (EONGY)
Current Dividend Yield: 9.98%
Country: Germany

4.Company: International Power (IPRPY)
Current Dividend Yield: 2.81%
Country: UK

5.Company: Enagas SA (ENGGY)
Current Dividend Yield: 6.09%
Country: UK

A Bloomberg report yesterday noted that E.ON had a record weekly gain of 17% in Frankfurt trading this week as investors bet on a turnaround for the industry.

Morgan Stanley’s least preferred utilities include Veolia (VE), GDF SUEZ (GDFZY), Drax (DRXGY) and Essar Energy (ESSR.L). London-listed Essar Energy is an integrated energy company in India with operations in the power and oil and gas industries. France-based Veolia Environnement Ve SA has operational issues and the stock fell heavily last month. Hence investors may want to avoid Veolia at this time.

Disclosure: Long EONGY and VE

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