Jefferies Names E.ON, RWE, and EDP as Top European Utility Picks Amid Surging Power Prices

Investment bank Jefferies has identified E.ON, RWE, and EDP as its top picks in the European utilities sector, arguing that the market is underestimating the industry's medium-term earnings outlook. The firm's analysis points to rising power prices and accelerating regulated capital expenditure as key drivers for growth.

A Bullish Sector Thesis

According to Jefferies, European utilities present an attractive investment opportunity following recent share price corrections. The bank believes current valuations do not fully reflect the sector's potential for strong performance through the end of the year and into 2027, driven by a favorable macroeconomic environment.

The core of the bullish stance rests on the continued strength in European power prices. Jefferies attributes this to elevated gas prices, tighter storage levels, and improving demand—a dynamic it expects will remain a key driver of utility earnings for the next several years.

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Jefferies' Top Selections

Jefferies highlighted three companies, each representing a different sub-sector, as being particularly well-positioned:

• E.ON (Regulated Utility): The German utility is Jefferies' top regulated pick, with its recent share price decline offering an attractive entry point. The firm sees a key upcoming catalyst in the October publication of Germany’s Network Development Plans (NAP 2026), which is expected to support a significant upgrade to E.ON's grid capex, driving faster growth in its regulated asset base (RAB) and earnings.
• RWE (Power Generation): Described as one of the sector’s most compelling growth stories, RWE is Jefferies' preferred power play. The bank projects a double-digit EPS compound annual growth rate (CAGR) for the company stretching into the early 2030s, underpinned by its exposure to strong wholesale power prices.
• EDP (Integrated Utility): The Portuguese firm is favored for its dual exposure to both rising power markets and accelerating network growth. Jefferies notes that EDP is one of the most power price-sensitive names in the sector, a key advantage that, combined with an attractive valuation, underpins its conviction in the stock.