Goldman upgrade lights up utilities
By Lisa Sanders, CBS.MarketWatch.com
Last Update: 4:53 PM ET May 23, 2003
DALLAS (CBS.MW) --Utilities stocks were the star of Friday's session, and bucked the tradition of lackluster pre-holiday trading, after Goldman Sachs upgraded its rating on the group.
Goldman analyst Jonathan Raleigh changed his rating to "attractive" from "neutral" based on "a combination of the low interest rate environment and likely tax benefits."
Utility dividends are currently yielding an average of 4.6 percent, which translates into 2.9 percent net of tax under current rules. Legislation passed in Congress and destined for President Bush's signature would propel that net-of-tax figure to about 3.9 percent, Raleigh noted. See related story.
"The bottom line is under almost any analysis the upside potential for the sector is significant and investors should add to their electric positions," Raleigh wrote in a note to clients.
His favorite stocks are Exelon (EXC: news, chart, profile), FirstEnergy (FE: news, chart, profile), PPL (PPL: news, chart, profile), Constellation Energy Group (CEG: news, chart, profile), Energy East (EAS: news, chart, profile), and FPL Group (FPL: news, chart, profile). All closed solidly higher with each exceeding their respective daily trading averages.
Reflecting the positive sentiment, the Philadelphia Utility Index (UTY: news, chart, profile) advanced 3.7 percent to close at 287.53 - a level not seen since August 2002. For more energy news, read Energy Watch.
Duke Energy (DUK: news, chart, profile) shares were traded most actively in the group, followed in order by CenterPoint Energy (CNP: news, chart, profile), The Southern Co. (SO: news, chart, profile) and TXU (TXU: news, chart, profile). Here too, all closed smartly higher on the session.
Meanwhile, Allegheny Energy (AYE: news, chart, profile) rose 5.2 percent to close at $8.90. Late Thursday, the Hagerstown, Md.-based company announced that Chief Financial Officer Bruce Walenczyk will take early retirement effective June 1 and be replaced on an interim basis by Treasurer Regis Binder.
Williams Capital analyst Christopher Ellinghaus took a less sanguine view of the move. "Unfortunately, the unexpected news will most certainly lead to delays in achieving the critical financial catalysts we are waiting for from Hagerstown," he wrote in a research note.
Nevertheless, "we believe that the CFO departure may accelerate the arrival of a new CEO, who we understand has received an official offer from the company and could provide a psychological boost," Ellinghaus said.
Last month, Allegheny named Jay Pifer, president of Allegheny Power, as interim president and CEO, replacing Alan Noia. Allegheny announced March 6 that Noia would step down as chairman, president and CEO once a replacement was named.
Elsewhere, the PSE Oil Service Index (OSX: news, chart, profile) added 0.7 percent to close at 97.04 as shares of Schlumberger (SLB: news, chart, profile) rose 5 cents to close at $47.18 and Baker Hughes (BHI: news, chart, profile) climbed 49 cents to close at $32.49.
Major oils added 0.9 percent as reflected in the CBOE Oil Index (OIX: news, chart, profile). ChevronTexaco (CVX: news, chart, profile) added 98 cents to close at $68.43, ExxonMobil (XOM: news, chart, profile) gained 3 cents to close at $35.98 and ConocoPhillips (COP: news, chart, profile) was up 26 cents to close at $53.16.
Meanwhile, natural gas-leveraged stocks boosted the Amex Natural Gas Index (XNG: news, chart, profile) by 2.5 percent to close at 194.14.
In commodities trading on the New York Mercantile Exchange, prices settled higher.
The July crude futures contract added 31 cents to settle at $29.16, natural gas for June delivery rose 8.4 cents to settle at $6.119 per million British thermal units, June unleaded gasoline was up 1.33 cents to close at 90.65 a gallon and June heating oil gained 0.03 cent to close at 74.40 cents a gallon. See Futures Movers.
Lisa Sanders is a Dallas-based reporter for CBS.MarketWatch.com. |
