Gas, Coal Shares May Gain Most on Nuclear Crisis, JPMorgan Says

Oil, coal, and utility stocks are more likely than solar energy shares to benefit from a potential switch away from nuclear power following Japan’s earthquake and nuclear crisis, according to JPMorgan Chase & Co.

Exxon Mobil Corp. (XOM) and Chevron Mobil Corp., the largest U.S. energy companies, may gain due to a rally in natural gas, Thomas J. Lee, JPMorgan’s chief U.S. equity strategist wrote in the note today. Lee’s list of 12 companies that may benefit also included Peabody Energy Corp. (BTU), Consol Energy Inc. (CNX), and Arch Coal Inc. (ACI), which may rise on speculation that the disaster will boost demand for coal.

“We believe the tragic events in Japan and the unfolding nuclear situation have raised concerns globally about the safety of nuclear energy,” Lee wrote. “Over the coming months, a natural upshot could be an increased public resistance to nuclear energy.”

First Solar Inc. and Sunpower Corp., the biggest solar energy companies, advanced 7.1 percent and 7.7 percent as the the nuclear disaster unfolded last week. The solar energy industry is less likely to benefit because it has never been in direct competition with nuclear producers, according to Chris Blansett, JPMorgan’s alternative energy analyst.

“Unless a backlash against nuclear results in more favorable regulation for solar (not just against nuclear), we think it’s a bit premature to get more bullish on anything in the solar space,” Blansett said in the note.

Entry Point

The Standard & Poor’s 500 Index at the 1,250 level marks “an attractive entry point for equities,” and is the “probable low” for the year, Lee said. The S&P 500 has declined 1.9 percent through March 18 since Japan’s worth earthquake on record and the nuclear crisis at the Fukushima Dai-Ichi nuclear plant that was damaged by the March 11 temblor and tsunami.

The U.S. equity benchmark rallied 1.6 percent to 1,299.32 at 12:28 p.m. in New York. It fell as low as 1,249.50 on March 16.

The S&P 500 Index has declined about 5 percent on average in the 25 days following five nuclear accidents since 1950, Lee wrote. After the nuclear accidents and the subsequent market slump, the S&P 500 regained its previous level in 30 days on average, he said.

Electric utilities may also gain if the U.S. shifts from nuclear energy toward natural gas as would ITC Holdings Corp. (ITC), which is positioned to build the transmission grid that such a shift would require, according to Andrew Smith, JPMorgan’s electric utilities analyst.

Other companies that may benefit from a transition from nuclear energy are engineering and construction companies Fluor Corp. (FLR) and Chicago Bridge & Iron Co. NV, energy production and exploration companies, PetroHawk Energy Corp. (HK), Southwestern Energy Co. (SWN), and Range Resources Corp. (RRC), and utility NRG Energy Inc. (NRG) JPMorgan said.

To contact the reporters on this story: Jennifer Johnson in New York at jjohnson156@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.

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