Jefferies Names Top Picks in EU Utilities as Power Prices Surge

Jefferies has reportedly turned bullish on European utilities following a summer break, identifying three top picks expected to profit from surging power prices and intensifying regulated capital expenditure growth. The brokerage asserts that the market is still underestimating the sector's medium-term earnings potential, despite current valuations appearing attractive post recent share price corrections.

The firm's primary targets, encompassing regulated, power, and integrated utility exposure, are anticipated to generate robust returns through the end of the year and into 2027.

Among the three, E.ON holds the top spot in the regulated-utilities category. After a recent share price dip, Jefferies perceives a compelling entry point for the stock, citing its first-half performance as a sign of near-term upside relative to consensus expectations. A critical event driving this optimism is the upcoming October release of Germany's Network Development Plans (NAP 2026), which Jefferies anticipates will lead to a substantial increase in E.ON's German grid capital expenditure, subsequently accelerating regulated asset base (RAB) and earnings growth.

RWE emerges as Jefferies' preferred play within the power sector, and one of the utility space's most compelling growth narratives. The broker maintains a bullish outlook on RWE, driven by an expectation of continued strength in European power prices, fueled by surging gas prices, dwindling storage levels, and rising demand. This bullish sentiment is projected to persist as a key catalyst for utility earnings in the years to come.

EDP has been identified by Jefferies as the top pick among integrated utilities. The brokerage believes EDP is among the most sensitive to power price movements, offering a unique combination of strong exposure to escalating power prices and accelerating network growth, all at an attractive valuation. This dual exposure, encompassing both power markets and regulated network expansion, forms the basis of Jefferies' conviction in EDP's potential through 2027.