Top Utility Stocks to Watch, According to Jefferies

Jefferies has revealed its preferred selections across the U.S. power and utilities space, citing prospects that span from data center expansion upside to defensive options backed by solid balance sheets.

The brokerage's list covers a broad array of subsectors, including integrated utilities, transmission and distribution companies, independent power producers, renewable energy companies, engineering and construction outfits, and midstream operators. The following are Jefferies' ten favored stocks in the sector.

1. NiSource (NI): Jefferies believes the recent adverse Indiana utility reset is more than adequately reflected in the company's share price under a reasonable-case scenario. The firm also remains optimistic that Microsoft or another client will sign with its generation unit by the third-quarter 2026 earnings call.

NiSource posted second-quarter adjusted earnings of $0.16 per share, falling short of analyst projections, while revenue of $1.28 billion came in above expectations. In a separate move, Mizuho cut its price target on the stock, pointing to regulatory uncertainties in Indiana.

2. Entergy (ETR): Although the precise timing is hard to predict, Entergy possesses one of the strongest data center opportunity sets in the sector. Jefferies expresses high confidence that additional announcements over the next six months could lead to significant upward revisions in consensus estimates.

Entergy's second-quarter results missed expectations, with adjusted earnings of $1.03 per share and revenue of $3.55 billion both trailing analyst forecasts. The company also recently completed a $1.5 billion offering of junior subordinated debentures.

3. Xcel Energy (XEL): The utility offers one of the most favorable price-to-earnings growth ratios while still having additional room for consensus upward movement. Although the ability to underwrite Colorado wildfire legislation may become more challenging after California setbacks for peers, Jefferies still anticipates that Xcel's shares could strengthen on the possibility.

In a recent development, Xcel Energy reported second-quarter adjusted earnings of $0.93 per share, beating consensus estimates, while Mizuho raised its price target on the stock. The company also received a follow-on order for three Xos Hub mobile charging systems.

4. Ameren (AEE): The company features a leading balance sheet, an overall lower-risk 8%-plus outlook, and a constructive backdrop in Missouri. Its strategic plan is less reliant on data centers than most peers.

Ameren announced second-quarter adjusted earnings of $1.13 per share, surpassing analyst estimates, though revenue came in below expectations. Following the results, Mizuho raised its price target on the shares, citing data center demand.

5. American Electric Power (AEP): Near-term clarity is limited, but Jefferies expects to see improved visibility on third-quarter earnings per share compound annual growth rate enhancement. Key catalysts include Texas 765 kilovolt projects, the Ohio Governor election, an Indiana regulatory review, and Wyoming fuel cells.

American Electric Power's second-quarter operating earnings of $1.36 per share and revenue of $5.45 billion both fell below analyst forecasts. Despite the miss, the utility raised its full-year 2026 operating earnings guidance.

6. PPL Corporation (PPL): A bilateral new generation announcement related to its Blackstone joint venture is expected in the coming months. Kentucky hyperscaler developments could further help break the transmission and distribution discount and support a premium valuation.

PPL Corporation reported second-quarter earnings of $0.33 per share, meeting expectations, and its Kentucky subsidiaries received approval for additional rate increases. Separately, both Jefferies and BMO Capital lowered their price targets on the company's stock.

7. NRG Energy (NRG): High underlying commodity uncertainty exists today, but Jefferies argues that it is already priced in at a high-teens 2029 free cash flow yield with buybacks. The company's new generation strategy is politically aligned.

NRG Energy reported second-quarter adjusted earnings of $1.49 per share, missing Wall Street's estimate, while its revenue of $7.48 billion slightly exceeded projections.

8. Nextpower (NXT): The stock has meaningfully underperformed despite what Jefferies expects was one of the company's strongest guidance updates in November.

9. MasTec (MTZ): Jefferies views the current high-single-digit discount to peers as unwarranted given the company's scale, scope, diversification, and growth. The new Superior Group acquisition adds inside-the-fence electrical contracting capabilities to expand into data center growth.

MasTec's second-quarter adjusted earnings of $2.22 per share were in line with expectations, while revenue of $4.375 billion beat forecasts. Despite raising its full-year outlook, both Truist and KeyBanc lowered their price targets, citing weaker guidance for the communications segment.

10. Williams Companies (WMB): Behind-the-meter tailwinds have been strengthening despite a more challenging outlook in Texas and Pennsylvania. The company retains significant balance sheet latitude and a repeatable partnership framework to support further growth.

Williams Companies posted second-quarter adjusted earnings of $0.50 per share, matching forecasts, while its revenue of $3.05 billion surpassed expectations. Following the results, RBC Capital raised its price target on the stock.

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