Analysts at Barclays have identified electrification as a “mega theme” and have named several stocks set to benefit. Electrification — particularly expanding and modernizing the grid — is needed to accommodate growing electricity demands, changing grid characteristics and extreme weather, the analysts wrote in a research note dated Aug. 16. “The electric grid plays a key electrification and energy transition role,” they said. “At the center of the electrification mega theme, which encompasses EVs, renewables, energy storage, smart buildings, heat pumps, and more, is an aging electric grid that is key to ensuring a clean, reliable, affordable, and equitable energy transition.” Referencing statistics from the U.S. Department of Energy, the bank pointed out that a 3-5 times acceleration in transmission expansion in the U.S. alone is needed to meet increasing load and renewable penetration. This is in addition to the need to replace, modernize, and harden the existing U.S. grid with around 70% of transmission lines and transformers that are over 25 years old. Stock picks The bank named a number of companies it said were “tied to changing grid trends and provide their end-market exposure.” These include: MasTec — which focuses on engineering, construction and maintenance services for the energy and utilities sectors in North America — is one of the stocks rated overweight by the bank. Barclays’ overweight rating corresponds to a buy recommendation. The bank is also overweight-rated on energy management company Schneider Electric . Its energy management products “support smart grid and microgrid technologies, EV charging infrastructure, electricity distribution networks, and secure power systems,” the analysts said. It also has an industrial automation segment. U.S company nVent Electric , which provides electrical connection and protection solutions, is also rated overweight by Barclays. The company has guided 4-6% year-on-year growth in its 2023 organic revenue (which accounts for 13% to 15% of total growth) as “secular tailwinds continue in electrification,” the analysts wrote. Barclays is overweight-rated on General Electric despite its plans to spin off GE Vernova, which comprises its power, renewable energy, digital and energy financial services businesses, in 2024. GE expects Vernova organic revenue to rise by mid single-digits on the year, with its renewable energy division revenue up high single-digits. — CNBC’s Michael Bloom contributed to this report.
