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Investing.com -- Bernstein reshuffled its stock ratings within the European utilities sector, upgrading National Grid (LON:NG) to Outperform while downgrading Orsted (CSE:ORSTED) and Fortum (HE:FORTUM) to Market Perform.
National Grid, which has approximately 50% of its assets in the United States, has not experienced the same re-rating as its U.S. counterparts over the past year, according to Bernstein analysts.
Despite a favorable regulatory environment and significant growth potential in the UK, the firm’s U.S. business continues to trade at a discount compared to European regulated network peers.
“Considering its growth, visibility and returns, we see no reason for the US business to trade at a discount,” analysts led by Deepa Venkateswaran said in a note, setting a new price target on the stock of 1,120p, indicating a 17% upside.
Conversely, Fortum’s stock has been downgraded due to limited upside potential. The share price has increased by roughly 35% over the past year, reaching a point where it closely aligns with Bernstein’s price target of €16.5.
“To turn more bullish on the next upwards leg of the stock from here, we would have to see more substantive evidence of future power demand growth materializing and pushing up the forward price curve or successful execution by Fortum of power purchase agreements (PPAs) at above market rates,” the analysts said.
Orsted also received a downgrade from Bernstein, with the firm citing a less attractive risk-reward ratio following a 14% increase in share value since February 2025.
The company faces challenges with its construction and divestment programs, particularly in the U.S. offshore wind market, which is operationally and politically complex. Bernstein has maintained its price target for Orsted at DKK 395.
Following these rating changes, Bernstein now prefers utilities with exposure to regulated electricity networks, such as SSE (LON:SSE) and National Grid, which benefit from supportive jurisdictions in the UK and U.S.
The investment bank also shows a preference for RWE (ETR:RWEG) over Orsted within the renewables sector, due to RWE’s stronger balance sheet and lower exposure to the U.S. offshore market.
Bernstein’s highest conviction picks in the pan-European Utilities sector now include SSE PLC (LON:SSE), Terna (BIT:TRN), E.ON SE (ETR:EONGn), Endesa (BME:ELE), Redeia Corporacion SA (BME:REDE), National Grid, Enagas (BME:ENAG), and Engie SA (EPA:ENGIE).