Recession Risk Is High, But Analysts Say This Sector Is Shielded From Tariff Impact

JPMorgan analyst Jeremy Tonet sees utility companies relatively well-positioned amid concerns that recent tariff hikes could trigger a global recession.

What Happened: JPMorgan projects a -0.3% U.S. GDP contraction in 2025.

Maia G. Crook, also a JPMorgan analyst, says the probability of a U.S. recession has surged to 60%. That’s up from 40% last month, due to the latest round of tariff hikes.

The analysts’ view on utilities reflects the sector’s regulated return profile and cost-of-service structure, which insulate them from direct tariff-related EPS impacts.

Moreover, potential rate cuts may further boost their income appeal.

Meanwhile, Tonet says that prolonged tariff uncertainty could harm sentiment and the broader economy, creating affordability challenges that may impact utilities' capex plans and returns, especially in regions with tight energy supply.

Tonet downgraded Dominion Energy, Inc. (NYSE:D) from Neutral to Underweight and cut the price forecast from $59 to $52.

The company’s Coastal Virginia Offshore Wind (CVOW) project faces increased risks with $2.5 billion in remaining non-US spending and potential steel/EU/Mexico tariff impacts, which could add $500 million-$625 million in costs.

Combined with still-to-be-finalized PJM network upgrades (+$600 million), these factors pose external challenges, adds the analyst.

Moreover, the analyst writes that administration support for offshore wind seems to be uncertain, adding to concerns.

On the other hand, Tonet raised the rating for WEC Energy Group, Inc. (NYSE:WEC) from Underweight to Neutral and the price forecast from $106 to $108.

Tonet says that WEC stands out due to its lack of rate case exposure and favorable regulatory environment in Wisconsin.

The company is well-positioned as a defensive stock, benefiting from regulatory stability and potential upside from projects like MSFT/Cloverleaf data centers, adds the analyst.

Also, the analyst upgraded Southern Company (NYSE:SO) from Underweight to Neutral while maintaining the price forecast at $94.

The analyst writes that SO stands out within utility coverage for its strong regulatory environment, solid balance sheet, large scale, and economic resilience in its service area.

However, ongoing regulatory uncertainty tied to the Georgia Power rate case limits immediate upside, adds the analyst.

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