UBS lays out the best names to play the $2 trillion clean energy transition


UBS says that a tidal change in corporate support for energy transition, combined with government funding has created a growth cycle which can reach $2 trillion. Some stocks will benefit. Analyst Shneur Gershuni said that the second-quarter earnings report showed “clear divergence”, in terms of whether or how the government’s approximately $600 billion benefits to support the green energy transformation would help companies. He said that it depends on the companies’ position in the value-chain. The timelines for receiving this support can also differ. He said that while some companies have already benefited from the energy transition, other are not expected to until 2024 or later. Gershuni has updated his list following the most recent corporate earnings season. Investors can now use the stocks to play the capital expenditure cycle of the energy transition. Aemetis, Sempra, and DTE Energy are among the new additions to Gershuni’s list. These names replaced SPX Technologies, FTC Solar and other stocks. The 10 stocks that were added to his list include all the new ones: Gershuni explained that Sempra was included after it announced its increased exposure to energy transition. The company announced late last month that a subsidiary will work with a Japanese group to develop a carbon neutral gas production and supply chain for liquified gas. The shares have been underperforming the market in this year. They are down 7.6% from 2023’s beginning. According to LSEG (formerly Refinitiv), the average analyst with a buy rating sees a potential upside of over 17%. Eaton Corporation, which is also listed on the list, is expected to benefit from increased investments in electrification. Gershuni said that this was due to a “close alignement” with industrial trends such as reshoring, where companies move their supply chains to domestic soil. ETN YTD mountain Eaton’s strong year. Unlike Sempra’s stock, Eaton has had a stellar year with a 52% increase. Wall Street believes that this rally is losing momentum, as the average price targets of analysts polled and surveyed by LSEG indicate a decline of more than 2%. The average analyst still has a Buy rating for the stock. NextEra Energy was also included, because Gershuni stated that the company is well positioned to take advantage of the unregulated growth associated with the Inflation Reduction Act. According to LSEG, despite the company’s 19% decline this year, analysts expect a 32% increase in earnings. LSEG reports that the average analyst gives a buy recommendation. Carly Davenport of Goldman Sachs is one of these analysts. She said last month in a client note that the stock’s poor performance could create an opportunity for investors. She said, “We reiterate our buy rating on NEE after its underperformance. We believe that the market is still supportive of a change in pace in renewables additions. This we believe will lead to best-in-class earnings growth for NEE.” Michael Bloom, CNBC’s Michael Bloom, contributed to this article.