UBS Upgrades Public Service Enterprise Group to Buy, Expects Big Upside from Nuclear Contracts
Summary
UBS has upgraded Public Service Enterprise Group (PEG) to Buy, raising its price target to $97 from $86. The upgrade is based on PEG's strong utility fundamentals and significant upside potential from its nuclear power portfolio, particularly through anticipated power purchase agreements. UBS projects robust EPS growth without equity issuance and expects nuclear contracts to unlock substantial shareholder value, leading to a significant stock re-rating.
UBS Upgrades Public Service Enterprise Group (PEG) to Buy, Citing Nuclear Contract Upside
Publication Date: July 7, 2025
Public Service Enterprise Group (NYSE: PEG) has received an upgrade from UBS, moving its rating from Neutral to Buy. Concurrently, UBS significantly increased its price target for PEG shares from $86 to $97. This optimistic outlook is primarily driven by strong underlying utility fundamentals and the substantial, yet currently undervalued, potential within PEG's nuclear power portfolio.
Key Drivers for the Upgrade
UBS analysts highlighted several compelling factors underpinning their upgraded rating and increased price target:
- Stable Financial Foundation: PEG is projected to achieve a robust 6.5–7.0% annual Earnings Per Share (EPS) growth over its five-year plan. Crucially, this growth is expected without the need for equity issuance, signaling a strong and self-sustaining financial position.
- Nuclear Portfolio Value: A significant catalyst for PEG's valuation is the potential for securing a nuclear power purchase agreement (PPA). UBS anticipates a PPA for approximately one-third of PEG's nuclear output at a price point of around $84/MWhr, aligning with recent market transactions for similar assets. This specific PPA alone is estimated to contribute roughly $7 per share to PEG's value. The analysts further suggest that full contracting upside across PEG's nuclear assets could exceed $20 per share.
- Market Appetite for Baseload Nuclear: Despite ongoing investor focus on New Jersey policy uncertainties and the timing of a PPA announcement, UBS emphasizes a clear and growing market demand for baseload nuclear energy assets. This demand is expected to facilitate the realization of value from PEG's nuclear fleet.
Unlocking Shareholder Value
UBS draws parallels between PEG's current situation and the successful value unlocking observed at peers such as Constellation Energy (CEG) and Talen Energy (TLN), both of which have benefited from their nuclear assets. The firm believes PEG's nuclear portfolio is poised to deliver meaningful shareholder value as contracts materialize.
Financial Projections and Re-rating Potential
Factoring in the anticipated value realization from nuclear contracts, UBS has revised its 2027 EPS forecast for PEG to $4.20. This projection suggests that PEG shares are currently trading at an attractive discount relative to future earnings potential. As nuclear contracts are secured and announced, UBS expects a significant re-rating of PEG's stock, reflecting its enhanced intrinsic value.
Conclusion
UBS's upgrade of Public Service Enterprise Group underscores a strong belief in the company's financial stability and the significant, yet largely untapped, value embedded within its nuclear assets. The potential for lucrative nuclear power purchase agreements is seen as a primary driver for future share price appreciation, positioning PEG for a substantial re-rating in the market.