Water Utilities Outperformed in July as Electric Peers Lagged, BTIG Reports

The utilities sector lagged the broader market in July, underperforming the S&P 500 by approximately 150 basis points for the month, according to a report from BTIG released Monday. This continues a year-to-date trend, with the S&P 500 now outpacing the utilities sector by roughly 470 basis points.

Sub-Sector Divergence

A clear split emerged within the sector last month, with water and gas utilities showing strength while electric utilities faced headwinds. Water and gas names each gained over 200 basis points in July, BTIG reported. The water sub-sector has been a particularly strong performer throughout the year, gaining nearly 12% year-to-date.

In contrast, electric utilities were the worst performers for the month, declining 3.40%. The report suggests that companies with exposure to large load growth appeared to face the most significant pressure.

Company-Level Performance

Individual company performance reflected the sub-sector trends. Chesapeake Utilities (CPK) was the top performer in BTIG's coverage, gaining 8.41% and outperforming the utilities sector by about 10%. BTIG attributed this largely to the company's FEP project announcement and a broader recovery in gas utility stocks.

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Other notable movers included:

• Spire (SR): Also outperformed, gaining approximately 2.27%.
• American Electric Power (AEP): The worst performer in BTIG's coverage, declining 6.55% and underperforming the sector by about 490 basis points.
• Entergy (ETR) and IDACORP (IDA) were also among the worst-performing utility stocks for the month.

Macro Headwinds and Outlook

The broader financial environment presented a challenge for the capital-intensive sector, as the 10-year Treasury yield rose 23 basis points in July. BTIG noted that rising interest rates could have implications for the sector's large load build-out cycle.

Looking ahead, the firm stated it is monitoring key developments, including upcoming rate case orders for Duke Energy (DUK). Additionally, progress on "Batch Zero" load classifications will be a key catalyst, with AEP, CenterPoint (CNP), and Sempra (SRE) expected to receive notifications on August 7.