Utilities and REITs Face New Growth Drivers

Utilities Refocus on Growth, Risk and Regulation

Several large U.S. utilities are drawing fresh investor attention as they update strategies on risk, capital spending and demand growth. Edison International, CMS Energy and DTE Energy each face distinct catalysts, from wildfire cost securitization in California to major data center loads in Michigan and an upcoming outlook webcast in Michigan.

Alongside these moves, valuation and analyst expectations are shifting, with investors weighing regulated returns, balance-sheet pressures and new long-term demand sources such as electrification, clean energy and AI-related infrastructure.

Edison International: Wildfire Securitization and Valuation Debate

Edison International has filed to securitize $1.951 billion of Woolsey fire related costs as part of a broader effort to reduce debt and reshape its wildfire risk exposure. The stock has shown improving performance, with a 90 day share price return of 8.22% and a one year total shareholder return of 5.76%, trading recently around $62.39.

A widely followed valuation narrative assigns Edison International a fair value of about $67.37 per share, implying the stock is undervalued relative to its recent price. That view rests on expectations of mid single digit revenue growth, softer profitability assumptions and a future price-to-earnings multiple of about 13 times, still below many electric utilities.

Policy-driven increases in electrification, including electric vehicle adoption and building decarbonization, as well as state and federal investment in grid modernization and renewable integration, are cited as drivers of long-term load growth and an expanding regulated rate base. However, ongoing wildfire liabilities and evolving California regulation around cost recovery and rate design are highlighted as key risks to the earnings outlook.

CMS Energy: Outlook Webcast and Adjusted Analyst Targets

CMS Energy plans to release its 2025 year-end results and provide a business and financial outlook via webcast on February 5, 2026, with an audio replay available for 30 days. This event comes as analysts have updated their assumptions, refining external expectations for the company’s prospects.

The investment case for CMS Energy centers on regulated grid and clean energy investments in Michigan under a generally constructive regulatory backdrop. A large capital program remains the key catalyst and risk, given its implications for debt levels, equity dilution and coverage of dividends and interest costs.

Barclays recently maintained a positive rating on CMS Energy but reduced its price target from US$82.00 to US$74.00, capturing a recalibration of expectations ahead of the February 2026 webcast. One narrative projects revenue of $9.2 billion and earnings of $1.4 billion by 2028, implying 4.6% annual revenue growth and about a $0.4 billion earnings increase from $1.0 billion, and suggesting roughly 9% upside to the current share price.

DTE Energy: Data Center Load and Mixed Earnings Revisions

DTE Energy has been assigned an average recommendation of “Moderate Buy” by thirteen research firms, with four rating the stock hold, eight rating it buy and one rating it strong buy. The average one year price target is $147.75, and the shares recently opened at $135.51, between a twelve month low of $116.30 and a high of $143.79.

Recent news includes DTE’s acceptance of contract conditions to power a major OpenAI/Oracle data center south of Ann Arbor, which is expected to support incremental long-term power demand and industrial and commercial revenue, signaling utility-scale load growth. Zacks Research has raised several near-term earnings estimates, notably for the third quarters of 2026 and 2027 and the second quarter of 2026, while trimming other quarterly and full-year forecasts, resulting in a modestly revised earnings trajectory.

DTE reported third quarter earnings per share of $2.25, beating consensus estimates of $2.10, on revenue of $3.53 billion. Return on equity stood at 12.63% with a net margin of 9.34%. The company has issued earnings guidance of $7.09 to $7.23 per share for 2025 and $7.59 to $7.73 for 2026 and recently increased its quarterly dividend to $1.165 per share, representing an annualized dividend of $4.66 and a yield of 3.4%.

Digital Realty: AI Partnerships and Cash Flow Outlook

Digital Realty Trust has reported continued momentum in its data center operations in early February 2026, supported by stronger core funds from operations trends, positive analyst earnings revisions and expanded AI-focused infrastructure collaborations, including a partnership with NVIDIA in Northern Virginia.

These developments reinforce perceptions of robust demand for AI and cloud data center capacity and tie directly into Digital Realty’s project pipeline and capital partnerships. A narrative projects revenue of $7.9 billion and earnings of $1.0 billion by 2028, requiring 11.5% annual revenue growth and a $0.3 billion earnings decrease from $1.3 billion today. That scenario underpins an estimated 21% upside to the current share price.

Simply Wall St community valuations for Digital Realty range from US$110.45 to US$241.23, underlining a wide spread of opinions on how AI-related demand, record backlog and hyperscale fund ambitions balance against financing conditions, interest costs and potential oversupply in key U.S. markets.

Valuation Themes Across Utilities and Real Estate

Across these names, investors are weighing regulated earnings stability and long-term infrastructure demand against balance sheet risks, policy shifts and capital needs. Edison International’s wildfire securitization, CMS Energy’s capital program, DTE’s data center load growth and Digital Realty’s AI infrastructure build-out each frame how future cash flows and risk profiles may evolve.

Valuation narratives point to potential upside in several cases, but also highlight uncertainties around regulation, financing costs, demand sustainability and execution on large-scale projects, leaving room for differing interpretations among analysts and investors.