Reform remains unresolved, UBS downgrades Pacific Gas and Electric (PCG.US) rating to "Neutral"

According to information from Zhitong Finance APP, UBS has downgraded California utility company Pacific Gas and Electric (PCG.US) from "Buy" to "Neutral" and has lowered the target price from $19 to $14, citing increasing risks that the company has made no progress this year on wildfire liability reform, as well as the company's decision to withdraw its long-term earnings growth rate guidance while announcing a strategic review.

The company's share price fell 3.5% in Wednesday trading, reaching its lowest level since September 2022.

UBS analyst Gregg Orrill noted that California Governor Newsom recently discussed holding a special legislative session on artificial intelligence, but did not mention the wildfire issue; meanwhile, gubernatorial candidate Xavier Becerra has been more vocal in pushing for wildfire reforms, which has further delayed potential catalysts for Pacific Gas and Electric's share price.

Orrill has lowered his long-term earnings per share (EPS) growth rate forecast for Pacific Gas and Electric from 9% to 8.5%, citing his compounded calculation of the company's deferral of $2 billion in capital expenditures from 2027 to 2030; he also pointed out that tax loss selling pressure and interest rate risk further diminish the stock's appeal.

The analyst has also lowered his fiscal 2028 EPS forecast from $1.95 to $1.90 and has cut the five-year capital expenditures outlook by $6 billion to $65.5 billion. Previously, the company recently deferred $2 billion of 2027 capital expenditures from the "growth category."