Morgan Stanley: Our analyst Rob Pulleyn thinks it is too early to move away from the utilities theme, as he believes the market is not fully discounting the outlook: the market does not yet seem to have digested the shift in regulated utilities from “low growth dividend” companies to “quality growth” companies. In more detail, Pulleyn estimates an average CAGR of 6% in EPS by 2024-27 (versus 3% consensus) in nine transmission- and distribution-focused stocks, combined with dividend yields of around 5% (>10% TSR for quality, low-risk stocks). This should prove attractive to generalist capital, as exemplified by Iberdrola. At the single name level, Rob expects further growth in Elia, SSE, National Grid, Iberdrola and E.ON, driven by a 7-10% CAGR in Northern European electricity distribution and 15-20% in transmission in Germany and the UK. In more detail, its 2025-30 EPS estimates are ~11-12% above consensus for National Grid and SSE, 7% above at Elia, 5% for E.ON and 2% for Iberdrola.
Iberdrola among utilities driven by 7-10% CAGR in distribution in Northern Europe and 15-20% in transmission in Germany and UK
