Public Service Leads Utility Retreat After Downgrade

Public Service Enterprise Group Inc. fell the most in more than two years after RBC Capital Markets cut the owner of New Jersey’s largest electricity utility to hold and said the sector is too expensive.

Public Service fell 3.9 percent to $38.89 at the close in New York, the biggest decline since August 2011. The 30-company Standard & Poor’s Utilities Index dropped the most intraday in 10 months.

Public Service’s announcement yesterday that it will settle for $1.22 billion of the $2.6 billion it sought to recover from customers to protect its power and natural gas systems against hurricanes was “disappointing,” Shelby Tucker, a New York-based analyst for RBC, wrote in a note to clients today. Misplaced expectations for higher electricity prices have buoyed utility stocks this year, Tucker said.

“The favorable attention given to the sector has reached a tipping point and is not sustainable,” wrote Tucker, who cut his 2015 and 2016 profit estimates for Public Service. “This is a good time to take profits in the stock.”

Before today, Newark, New Jersey-based Public Service had risen 27 percent this year and the S&P 50O Utilities Index had gained 14 percent this year, outperforming the wider S&P Index sevenfold.

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