15 Worst Performing Utility Stocks in 2023

Ramish Cheema
9 min read

In This Article:

In this piece, we will take a look at the 15 worst performing utility stocks in 2023. If you want to skip out on our introduction about the utility sector and how it became quite important last year, then head on over to 5 Worst Performing Utility Stocks in 2023.

The utility industry became one of the most important sectors of the market last year due to the shock of the Russian invasion of Ukraine on global energy markets. The worst hit markets were those in Europe, which had come to rely on large amounts of Russian crude oil and even larger amounts of natural gas. As the war started, and these supplies became risky and contributed to funding the Russian war effort, Europe started to diversify its energy supply chain.

The crisis also caused energy and crude oil prices to jump to record high levels in early 2022. While naturally this was a good thing for the oil companies, especially since the petro giants such as TotalEnergies SE (NYSE:TTE) and Exxon Mobil Corporation (NYSE:XOM) made record profits, the reality is a little bit more complex since not all companies were able to earn billions of dollars in revenue from elevated oil prices. Research from economists at the Bank of Italy shows that Russia accounted for 29% of the EU's crude and 43% of its natural gas imports in 2020 - a sizeable reliance that is not easy to break away from.

The research shows that when we take a look at two proxies for the financial performance of non-financial European companies part of STOXX Ltd.'s Eurostoxx 600 index, their equity returns drop inversely to their energy intensity while their default risk grows. Energy intensity is the extent that a firm relies on energy for its operations, for example, a large manufacturing company is likely to have a higher energy intensity than a retailing or hospitality company.

Narrowing our focus down to the utility industry, Boston Consulting Group (BCG) measured market sentiment in July 2022 when the initial shock of the invasion was at its highest and investors were looking at ways to balance the high interest rate environment with a disruption to the stock market that had hit technology and high growth stocks but boosted the prices of oil companies. Their research, dated November 2022, shows that historically, only 22% of the largest power and utility (P&U) companies had delivered higher shareholder returns than you would expect from a typical S&P 500 company. However, by July 2022, this had grown by more than three times to sit at a whopping 68% - indicating the sudden boost in the fortunes of utility companies was similar to their oil peers as both were bathing in share price growth and higher revenues.

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