European Utilities Strategy: YTD the sector has performed well in abs terms (+5%), but underperformed the MSCI Euro (-10%). We see contradictory signals: Lack of inflation, Earnings cut ,
Commodities vs. Earnings stabilization?, QE?, Weaker €. Question remains if the discount rate or are the earnings wrong? Using spot WACC in our long-term valuations points at c.40% upside
on average for the sector Key stocks: Outperform: Iberdrola (TP € 6.8); Centrica (TP 290p); Shanks (TP 115p) Underperform: Gas Natural Fenosa (TP €18); National Grid (TP 780p), Verbund
(TP €10.5) Stocks to watch: Enel (Neutral, TP €4.3), Engie (Neutral, TP €19.25) , Terna (U/P, TP €3.5, as an alternative to National Grid)