UPDATE 1-JP Morgan neutral on U.S. electric utilities sector
(Adds details, share movement)
Aug 11 (Reuters) - J.P. Morgan Securities took a "neutral" stance on the U.S. electric utilities sector, citing a number of concerns such as falling natural gas prices that have emerged in the past few weeks to pressure the group, and downgraded American Electric Power and Consolidated Edison.
The brokerage, which said it had been wrong to recommend a positive stance on the sector earlier this year, added it would now stick with bellwether names like FPL Group (FPL.N).
"We expected ongoing uncertainty about the U.S. economy coupled with the strong fundamentals and earnings momentum of the utilities group to support the stocks through the year. We were wrong," JP Morgan analyst Andrew Smith wrote in a note.
Smith downgraded American Electric Power Co Inc (AEP.N) to "neutral" from "overweight" and Consolidated Edison Inc (ED.N) to "underweight" from "neutral," while it upgraded FPL Group Inc to "overweight" from "neutral."
Smith said American Electric currently trades at a modest discount to the group, adding that he expects this to persist.
The analyst downgraded Consolidated Edison, citing a difficult regulatory environment.
Falling natural gas prices pressure power prices as natural gas is the input fuel that determines power prices in a number of U.S. markets, Smith said.
Investors are also concerned about Texas oil billionaire T. Boone Pickens' campaign, which suggests that the United States should invest $1 trillion in wind power to displace natural gas consumption for power generation in favor of natural gas consumption as a transportation fuel, Smith added.
"However, we believe the time horizon for investment of this magnitude is extremely long. In the near term, the level of wind farm development in the U.S. has not increased materially," Smith wrote.
Shares of American Electric were down 34 cents at $38.76 in morning trade on the New York Stock Exchange. Consolidated Edison shares were up 11 cents $41.02, while FPL shares were up 14 cents at $60.19 (Reporting by Anand Basu in Bangalore; Editing by Himani Sarkar)
