Goldman Sachs shuffles U.S. Utilities: 2 stocks upgraded, 1 lowered to Sell

Investing.com -- Goldman Sachs made several adjustments to its U.S. utilities coverage, upgrading Duke Energy (NYSE:DUK) and Ameren (NYSE:AEE) while cutting WEC Energy (NYSE:WEC) to a Sell, citing valuation concerns and earnings growth risks.

Duke Energy was raised to Buy from Neutral, with analysts pointing to compelling valuation and improved visibility on long-term generation investments.

“We raise Duke Energy (DUK) from Neutral to Buy as the stock has lagged more defensive peers year-to-date (YTD) and is making regulatory progress towards building significant generation that is not captured at current levels in our view,” analysts led by Carly Davenport said.

They also highlighted Duke’s robust capital expenditure (capex) growth expectations of 5.5% CAGR through 2029 and a strong regulatory track record in the Carolinas and Florida. Goldman now sees 17% total return upside to a $132 price target.

Moreover, the report noted Duke’s strategic advantage in developing gas generation capacity, backed by a partnership with GE Vernova, which enables the company to bring new gas turbines online more quickly and cost-effectively.

Additionally, analysts pointed to growing opportunities in small modular nuclear reactors and a positive trajectory in earnings growth and balance sheet strength.

The bank’s rating on Ameren was also lifted from Sell to Neutral. Analysts acknowledged “solid developments in Missouri outweigh the macro uncertainty and Illinois regulatory environment.”

Recent legislative support in Missouri, including Senate Bill 4, is seen as encouraging more utility generation, while an uptick in load growth from data center activity could help Ameren reach the upper end of its 6–8% earnings growth guidance.

The price target was raised to $100 from $91, implying 7% total return.

Goldman expects Ameren’s demand outlook to improve further in the late 2026–2027 period, with data center operations ramping up and 2.3 GW of signed construction agreements already in place.

Although exposure to Illinois remains a drag, analysts said 64% of Ameren’s capex through 2029 is now allocated to Missouri, helping to mitigate risks tied to the state’s lower ROEs.

Conversely, Goldman downgraded WEC Energy to Sell, arguing that “investor expectations are too optimistic around a change to the long term earnings growth rate,” particularly ahead of the company’s capital plan update.

WEC trades at the highest price-to-earnings (P/E) multiple among its peers, and Goldman believes that even if data center-related growth materializes, it may not be enough to justify the premium.

Given the limited near-term earnings impact and stretched valuation, the Wall Street firm sees the risk/reward profile as unfavorable.

The revised $100 price target implies a -2% total return.