National Grid Rated 'Outperform' by Bernstein on Regulated Growth Outlook

Bernstein resumed coverage of National Grid Plc (LON:NG) on Tuesday with an "Outperform" rating and a price target of 1,310 pence. In a note to clients, the investment firm named the utility its top pick among European regulated networks, highlighting an attractive entry point for investors given the stock's recent performance and resilient growth outlook.

Analyst Thesis

Bernstein's positive view is underpinned by National Grid's strategic shift toward electricity, which now accounts for approximately 75% of its portfolio following a multi-year disposal program. The firm forecasts that power demand in the UK and US will grow by more than 30% over the next decade, fueling a significant investment cycle.

This demand is expected to require £70 billion in capital investment over the five years leading up to fiscal 2031. Consequently, Bernstein projects National Grid's regulated asset base will grow at a compound annual growth rate (CAGR) of about 10%.

Geographic Strengths and Valuation

In the UK, which represents about 55% of the company's assets, Bernstein noted high visibility under an attractive regulatory framework. The firm expects National Grid to achieve nominal returns on equity of at least 9%-10% in the region. The U.S. business, comprising the remaining 45%, offers lower visibility but provides stable returns and strong cash generation, achieving a 9.1% return on equity in fiscal 2026.

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Despite the improved growth prospects, National Grid's stock is trading down approximately 20% from recent highs and at an 18% discount to its long-term average valuation, according to the note. Bernstein forecasts a five-year forward total shareholder return of about 14%, driven by an EPS CAGR of roughly 10% and a fiscal 2027 dividend yield of about 4%.

Identified Risks

Bernstein also outlined several risks to its rating and price target. These include:

• Sensitivity to rising bond yields and inflation in both the UK and the US.
• The potential for less favorable UK political rhetoric, with the note citing calls for "greater public control" over utilities.
• Affordability pressures in the U.S., which led the company to file a one-year rate stabilization plan in May 2026.
• Execution risk on major capital expenditure projects, noting that one key transmission project has already faced delays.