Core Insights - The article discusses the impact of ongoing inflation on the Federal Reserve's monetary policy and suggests focusing on low-beta defensive stocks to navigate market volatility [2][3][10] Economic Context - Inflation has risen, with the personal consumption expenditure (PCE) index increasing by 2.8% year-over-year in November, moving further away from the Federal Reserve's 2% target [6][8] - Personal income growth has slowed, with increases of 0.1% in October and 0.3% in November, below analysts' expectations [9] Investment Recommendations - Investors are advised to consider low-beta defensive stocks, particularly in the utility and consumer staples sectors, to mitigate market fluctuations [4][5] - Featured stocks include: - **Ameren Corp. (AEE)**: Expected earnings growth rate of 8.2%, Zacks Rank 2, beta of 0.58, dividend yield of 2.78% [12][13] - **Fortis, Inc. (FTS)**: Expected earnings growth rate of 4.2%, Zacks Rank 2, beta of 0.50, dividend yield of 3.46% [14][15] - **ONE Gas, Inc. (OGS)**: Expected earnings growth rate of 11.8%, Zacks Rank 2, beta of 0.81, dividend yield of 3.47% [16] - **Hormel Foods Corp. (HRL)**: Expected earnings growth rate of 6.6%, Zacks Rank 2, beta of 0.33, dividend yield of 4.76% [17] - **J&J Snack Foods Corp. (JJSF)**: Expected earnings growth rate of 4.5%, Zacks Rank 2, beta of 0.34, dividend yield of 3.43% [18][19]

Industry Overview - The Utility-Electric Power industry is focused on generating and delivering electricity to millions of customers in the U.S., with a strong shift towards cleaner fuel sources and reduced carbon emissions, supported by government initiatives [1] - The industry is investing in grid modernization and infrastructure improvements to enhance resilience against natural disasters like hurricanes, which helps in reducing outages and restoring power more quickly [1] Trends Impacting the Industry - Interest rates have decreased from a range of 5.25-5.50% to 3.75-4.00%, which is beneficial for utilities that rely on capital markets for financing infrastructure investments [4] - The share of U.S. electricity generation from renewables is projected to rise from 23% in 2025 to 28% in 2027, driven by growth in solar and wind capacity, aided by the Inflation Reduction Act [5] - Electricity consumption in the U.S. is expected to increase by 1% in 2026 and 3% in 2027, with prices for electricity also projected to rise across industrial, commercial, and residential sectors [6] Industry Performance - The Utility-Electric Power industry has outperformed the S&P 500 and its own sector over the past 12 months, gaining 24.2% compared to the sector's 21% and the S&P 500's 16.5% [10] - The industry's Zacks Rank is 87, placing it in the top 36% of over 244 Zacks industries, indicating positive near-term prospects [8][9] Valuation Metrics - The industry is currently trading at an EV/EBITDA multiple of 13.24X, compared to the S&P 500's 18.9X and the Utility sector's 12.48X, with historical trading ranges between 12.27X and 21.31X over the past five years [13] Investment Opportunities - NextEra Energy plans to invest over $74 billion through 2029 to modernize infrastructure and increase clean energy generation, with a long-term earnings growth forecast of 8.08% and a dividend yield of 2.67% [19][20] - Ameren Corporation expects to deploy over $26.3 billion in capital from 2025 to 2029, with a long-term earnings growth estimate of 8.52% and a dividend yield of 2.78% [23][24] - Alliant Energy anticipates long-term capital expenditures of $13.4 billion from 2026 to 2029, with a long-term earnings growth forecast of 7.15% and a dividend yield of 3.04% [27][28] - Pinnacle West Capital has a capital investment plan of $8 billion for 2026-2028, with a long-term earnings growth estimate of 3.56% and a dividend yield of 3.95% [31][32]

Core Insights - Investors are optimistic as the new year begins, with three consecutive years of double-digit returns in the market, leading to a perception among younger investors that the market consistently rises [1] Group 1 - The market has experienced three consecutive years of double-digit returns, indicating strong performance [1] - Younger investors may lack experience with market downturns, as they have primarily witnessed a rising market [1]

Market Overview - Volatility has returned to Wall Street, with major indexes giving up gains for the year due to uncertainty over the economy's health and fresh geopolitical tensions [1] - Investors are concerned about the economy's health, as consumer confidence fell to 89.1 in December, a decline of 3.8 points from November's reading of 92.9 [6] Defensive Stock Recommendations - Investors may want to focus on low-beta, defensive stocks, particularly from the utility sector, to cushion against market swings [2] - Recommended companies include: - **Ameren Corporation (AEE)**: Expected earnings growth rate of 8.2%, Zacks Rank 2, beta of 0.58, and a dividend yield of 2.74% [8][10] - **Fortis, Inc. (FTS)**: Expected earnings growth rate of 3.8%, Zacks Rank 2, beta of 0.50, and a dividend yield of 3.48% [12][10] - **Public Service Enterprise Group Incorporated (PEG)**: Expected earnings growth rate of 9.8%, Zacks Rank 2, beta of 0.6, and a dividend yield of 3.17% [14][10] Company Profiles - **Ameren Corporation**: A utility company serving nearly 2.4 million electric and over 900,000 natural gas customers in Missouri and Illinois [7] - **Fortis, Inc.**: Engaged in electric and gas utility business, operating primarily in Canada, the U.S., and the Caribbean [11] - **Public Service Enterprise Group Incorporated**: A diversified energy company with regulated electric and gas utility operations primarily in the Northeastern and Mid-Atlantic U.S. [13]

Core Viewpoint - Ameren Corporation will discuss its 2025 earnings and provide guidance for 2026 during a conference call scheduled for February 12, 2026 [1]. Company Overview - Ameren Corporation is based in St. Louis and serves 2.5 million electric customers and over 900,000 natural gas customers across a 64,000-square-mile area through its subsidiaries, Ameren Missouri and Ameren Illinois [3]. - Ameren Illinois offers electric transmission and distribution services as well as natural gas distribution services, while Ameren Missouri provides electric generation, transmission, and distribution services along with natural gas distribution [3]. - Ameren Transmission Company of Illinois focuses on developing, owning, and operating rate-regulated regional electric transmission projects within the Midcontinent Independent System Operator, Inc. [3].

Core Insights - Ameren Corporation's operations in Missouri and Illinois generate over $20.7 billion in annual economic output according to a study by HR&A Advisors [1][2] Economic Impact - The study highlights that every dollar and job related to Ameren's operations generates additional leading-wage jobs, disposable income, and increased tax revenue for communities in the bi-state region [2][3] - Ameren's annual efforts to manage costs and streamline operational efficiency help mitigate the impact of rising energy costs, increasing spending power for residential and business customers [3] Job Creation and Investments - Technical assistance from Ameren led to the creation of 3,728 new jobs in 2025, with 73 economic development projects triggering $3.56 billion in capital investment [4] - In 2025, businesses in Ameren Missouri's service territory created 2,273 new jobs and invested $1.56 billion, while those in Ameren Illinois' territory created over 1,455 new jobs and invested $2 billion [4] Financial Contributions - Ameren supports 55,200 jobs through its annual economic activity and purchased $2.2 billion from in-state suppliers in Missouri and Illinois [6] - The company contributed $920 million in taxes to state and local governments and provided $10.6 million in philanthropic support for community needs [6] Recognition - Ameren was recognized as one of Business Facilities magazine's 2026 Top Utilities for Economic Development [5]

Core Insights - The investment landscape in 2026 is influenced by themes from 2025, including AI optimism, Federal Reserve policies, geopolitical tensions, and tariff risks [1] Sales Growth as an Indicator - Sales growth is a reliable metric for evaluating stocks, reflecting actual demand and underlying company momentum, unlike earnings which can be influenced by accounting practices [3] - Consistent sales growth indicates potential market share expansion and successful entry into new markets, serving as an early indicator of earnings upside and long-term value creation [3] Contextual Analysis of Sales Performance - Sales performance should be contextualized against peers, industry trends, and economic conditions to identify companies with durable growth and competitive advantages [4] - Durable growth supports predictable cash flows, allowing management to reinvest and maintain balance sheet strength without excessive debt [4] Stock Selection Criteria - Stocks are shortlisted based on criteria including 5-Year Historical Sales Growth greater than industry average and Cash Flow exceeding $500 million [5] - Additional metrics include a Price/Sales (P/S) Ratio lower than industry average, positive changes in sales estimate revisions, operating margins above 5%, and Return on Equity (ROE) greater than 5% [6][7][8] Highlighted Stocks for 2026 - MKS Inc. (MKSI), Ameren Corporation (AEE), and ONE Gas, Inc. (OGS) are identified for their robust sales growth and strong financial fundamentals [10] - MKSI expects a sales growth of 6.9% in 2026, AEE projects 7.2%, and OGS forecasts a 5% increase, all while maintaining high cash flow and solid operating margins [10][11][12][13]

Core Insights - Ameren (AEE) is positioned to continue its earnings-beat streak, having surpassed earnings estimates in the last two quarters by an average of 2.17% [1][5] Earnings Performance - For the most recent quarter, Ameren reported earnings of $2.17 per share, exceeding the expected $2.1 per share by a surprise of 3.33% [2] - In the previous quarter, the company reported $1.01 per share against an estimate of $1 per share, resulting in a surprise of 1.00% [2] Earnings Estimates and Predictions - There has been a favorable change in earnings estimates for Ameren, with a positive Earnings ESP (Expected Surprise Prediction) indicating a strong potential for an earnings beat [5][8] - The current Earnings ESP for Ameren is +0.22%, suggesting increased analyst optimism regarding its near-term earnings potential [8] Zacks Rank and Success Rate - Ameren holds a Zacks Rank of 2 (Buy), which, when combined with a positive Earnings ESP, indicates a high likelihood of another earnings beat [8] - Stocks with a positive Earnings ESP and a Zacks Rank of 3 (Hold) or better have historically produced a positive surprise nearly 70% of the time [6]

Group 1 - Ameren Corporation (NYSE:AEE) is recognized as one of the 8 most profitable utility stocks to buy currently [1] - UBS maintains a buy rating on Ameren Corporation while reducing its price target from $121 to $115 [2] - Morgan Stanley keeps an Equal Weight rating on Ameren Corporation and lowers its price target from $108 to $103, highlighting data centers as a key growth driver for utility performance in 2026 [2] Group 2 - Ameren Corporation revised its long-term EPS growth guidance to a compound annual rate of 6% to 8% from 2025 through 2029, with a 2025 EPS estimate between $4.90 and $5.10 per share [3] - The projected EPS for 2026 is between $5.25 and $5.45 [3] - Ameren operates as a regulated utility in Illinois and Missouri, with improved regulations in Missouri creating substantial investment opportunities, while management has effectively navigated regulatory challenges in Illinois [4] Group 3 - The stock of Ameren Corporation has increased by 12.21% year-to-date as of December 31, 2025 [4]

Industry Overview - The US electricity demand increased in 2025, driven by industrial electrification, AI workloads, and transportation, with peak demand expected to grow by 26% by 2035 [2] - Industrial electrification may add 25 GW by 2030, while data center usage could reach 176 GW, a fivefold increase from 2024 [2] - 93% of new capacity through July 2025 will be renewable, but supply expansion is slow, with 2 terawatts trapped in interconnection lines [2] - Reliability issues are escalating, with 15 natural disasters in H1 2025 causing over $1 billion in damages, and residential retail prices predicted to rise by 4.5% from 2024 [2] Company Insights - Ameren Corporation (NYSE:AEE) reported a TTM net income of $1.41 billion and a net income margin of 16.34%, with 34 hedge fund holders [9] - Dominion Energy, Inc. (NYSE:D) reported a TTM net income of $2.61 billion and a net income margin of 16.79%, with 35 hedge fund holders [13] - Ameren Corporation revised its long-term EPS growth guidance to a compound annual rate of 6% to 8% from 2025 through 2029, with a 2025 estimate midpoint of $4.95 [11] - Dominion Energy emphasized the importance of the Coastal Virginia Offshore Wind Project for national security and energy demand, stating it is critical for providing reliable electricity to key sectors [14][15]