Steady as She Flows
In this edition of the Smart Investor newsletter, we examine the stock of one of the most stable regulated utilities in the U.S. But first, let’s dive into the latest Portfolio news and updates.
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Market & Portfolio Update
We’ve entered uncharted territory with the onset of a global tariff war – still very much underway, despite the recent reprieve. Although the market has cheered the partial truce, the situation remains unstable, and market moves continue to be largely unpredictable. Trade policy shifts have created a market driven more by headlines than fundamentals, while the importance of earnings, valuations, and even basic assumptions has become secondary. Analysts are left without reliable footing in their models, and traditional forecasts lose relevance almost as quickly as they’re published.
In this environment, Smart Investor is staying focused on what matters: fundamentals and business quality. We are not chasing short-term narratives or reacting to fear-driven swings. Instead, we continue to monitor industry leaders and resilient growers, ready to act when quality assets dislocate from their long-term intrinsic value. Short-term noise may dominate the tape, but durable businesses at reasonable prices remain the foundation of any successful long-term strategy.
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Portfolio Updates
❖ Bank of New York Mellon (BK) reported robust Q1 results with adjusted EPS of $1.58, up by 22% year-over-year, beating analysts’ estimates of $1.51 per share. The bank’s revenues increased by 5% year-over-year to $4.8 billion, surpassing Street estimates of $4.77 billion. BNY benefited from new client acquisitions and market volatility, which boosted the bank’s fees as investors reshuffled their portfolios. Total fee revenue rose 3% year-over-year to $3.4 billion in Q1, while net interest income climbed 11% to $1.16 billion. Assets under management reached $53.1 trillion, up 9% year-over-year. Looking ahead, the bank’s CEO Robin Vince described the outlook for the operating environment as becoming more “uncertain,” and therefore the bank will adopt a conservative stance.
❖ BlackRock (BLK) reported mixed Q1 results on Friday. Adjusted earnings per share were $11.30, up 15% year-over-year, beating Wall Street’s estimate of $10.14. The investment company generated Q1 revenue of $5.28 billion, a surprise miss compared to analysts’ Q1 estimate of $5.32 billion for the quarter. The company reported $84 billion of total quarterly net inflows driven by 3% annualized organic asset growth, led by record inflows in Q1 for its iShares ETF.
❖ Interactive Brokers (IBKR) reported mixed financial results for the first quarter. The stock trading platform reported adjusted EPS of $1.88, up by 14.6% year-over-year, though this fell short of Wall Street’s consensus forecast of $1.92. However, revenue during the January through March period of $1.43 billion narrowly surpassed the $1.41 billion that was expected on Wall Street. Furthermore, the company announced a four-for-one stock split. Each stockholder on June 16 will receive three additional shares of the company’s common stock. Trading on a split-adjusted basis is expected to start on June 18. The company also raised its quarterly dividend payment to $0.32 per share, up from $0.25, an increase of 28%.
❖ TSMC (TSM) is nearing the rollout of an advanced chip packaging mechanism to power Nvidia and Google’s superior artificial intelligence (AI) chips. TSMC is finalizing a new chip design integrating multiple semiconductors to boost computing power. It’s building an advanced packaging line in Taoyuan, Taiwan, with small-scale production set to begin around 2027. In another development, AMD will start producing chips at TSM’s Arizona plant.
❖ Amazon’s (AMZN) CEO Andy Jassy defended the company’s heavy investment of more than $100 billion in AI, calling it essential to stay competitive and improve customer experiences in his annual letter to shareholders. In his letter, Jassy emphasized the need for capital to secure AI chips and build data centers. Despite recent concerns over U.S.-China tariffs, Jassy said they’ve had little impact on consumer demand or Amazon’s expansion plans. The company continues to push into generative AI, including upgrades to Alexa and a major stake in the AI startup Anthropic.
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Portfolio Stocks Under Review
❖ We are keeping Uber (UBER) under review for a potential sale. The company remains a category leader in ride-hailing and food delivery, with a scalable platform, strong brand equity, and growing international reach. Its asset-light model has historically allowed it to navigate economic headwinds better than its peers, and its mobility segment – covering airport trips, commuting, and urban travel – still plays an essential role in the U.S., where public transport alternatives are limited.
But Uber sits at a crossroads. It operates as a hybrid business: part essential transport utility, part discretionary service. That duality now cuts both ways. Uber Eats, its delivery arm, is particularly exposed to a pullback in consumer spending. As trade tensions and inflation expectations rise, food delivery is quickly shifting from convenience to luxury for many households. Consumers under pressure simply eat out less and order in even less frequently.
Meanwhile, a broader trade war fallout poses indirect but real risks. If tariffs push up vehicle costs or parts prices, the impact could flow through to Uber’s driver base, which leases or finances most of its cars independently. Higher maintenance costs could shrink driver availability or increase Uber’s costs to keep the platform fully supplied. That squeeze comes at a time when competition for drivers is already rising in several markets.
Further uncertainty looms in Europe, where the regulatory environment is turning sharply more aggressive toward U.S. tech. Increased scrutiny, potential antitrust fines, and retaliatory tariffs could drag on Uber’s profitability in key cities like Paris, London, and Berlin – markets where Uber has invested heavily and relies on steady legal clarity to operate.
We are not turning bearish on Uber’s long-term prospects. Its diversified platform and urban relevance offer some protection in a slowing economy. However, if macro conditions worsen or consumer spending continues to decline, Uber’s earnings power could come under pressure. With that in mind, we’re placing the stock under review for a potential exit. The situation is fluid, and we will be watching ride volume trends, consumer sentiment, and trade policy developments closely over the coming months.
❖ We are keeping Charles Schwab Corporation (SCHW) under review for a potential sale. As a leading brokerage and financial services firm, Schwab has shown resilience through various market cycles, benefiting from a robust client base and a comprehensive suite of investment products.
However, recent developments call for a reassessment of its position within our portfolio. Shareholder activist John Chevedden has submitted proposals advocating for the declassification of Schwab’s board structure, aiming to enhance shareholder influence over the company’s management and make the board more accountable to shareholders. The board has expressed opposition to these changes ahead of its upcoming annual meeting on May 22, 2025.
This internal governance dispute comes during broad market turmoil driven by a global trade war, with elevated economic uncertainty triggering investor panic and driving heavy losses in major stock indices. This internal dispute may lead to larger losses than its peers due to the added uncertainty pressuring investor sentiment.
Schwab’s core business remains fundamentally sound, and we are not turning bearish on its long-term viability. However, in a market where stability and clarity are in short supply, we believe it is prudent to reassess exposure to companies facing both internal and external headwinds. We are placing SCHW under review and will revisit its position following the outcome of the shareholder meeting and further clarity on the direction of markets and trade policy.
❖ We are keeping Howmet Aerospace (HWM) under review for a potential sale. Howmet, a key supplier for Airbus and Boeing, has raised the prospect of shipment disruptions following the latest tariffs announced by U.S. President Donald Trump. According to Reuters, the company notified customers that the new trade measures could impede its ability to fulfill contracts, and formally declared a “force majeure” event – a legal clause that allows companies to suspend contractual obligations under extraordinary, unforeseeable external circumstances.
Howmet, a major player in the $150 billion jetliner supply chain, sources materials like aluminum and steel globally – many of which were already impacted by earlier tariffs. The new duties target additional countries critical to its operations, amplifying the pressure. This marks the first known instance of a major aerospace firm invoking force majeure in response to the latest round of tariffs, underscoring the strain on an industry still recovering from supply chain shocks.
While the letter does not announce a halt in shipments, it signals that HWM may be unable to fulfill some orders if compliance becomes economically or logistically unviable. The company also left room for negotiation, suggesting discussions with customers around cost-sharing.
In the short term, the declaration introduces legal and margin uncertainty that could weigh on sentiment and trigger a pullback in the stock. Analysts from Jefferies noted tariffs add “an extra layer of complexity” to an already strained industrial recovery, particularly in the first half of 2025, which could keep HWM volatile.
However, there are counterbalancing factors that may limit the downside, or even support a rebound. Howmet’s CEO has emphasized the strength of existing contracts, which may allow tariff costs to be passed through to customers. If successful, this could protect profitability, though negotiations could delay resolution. Additionally, HWM’s role as a Tier 2 supplier provides structural leverage – Boeing and Airbus cannot easily replace it without deepening their own supply chain bottlenecks. The company’s underlying fundamentals remain solid, and its financial flexibility should help it weather near-term turbulence.
Longer term, Howmet’s strong position in aerospace metals remains intact, but persistent tariffs or strained customer relationships could impair growth or compress margins. We will re-evaluate after more clarity emerges around deliveries, negotiations, and trade policy direction.
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Portfolio Earnings and Dividend Calendar
❖The Q1 2025 earnings season is in full swing, with several Smart Portfolio companies reporting in the next several days. These are: Taiwan Semiconductor Manufacturing Company (TSM), Charles Schwab (SCHW), GE Aerospace (GE), Verizon (VZ), RTX (RTX), Lockheed Martin (LMT), and Amphenol (APH).
❖ The ex-dividend date for EMCOR Group (EME) is April 17 and for Bank of New York Mellon (BK) is April 21.
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New Buy: Public Service Enterprise (PEG)
Public Service Enterprise Group is a fully regulated U.S. utility serving 4.3 million electric and gas customers in New Jersey through its subsidiary PSE&G. The company focuses on transmission, distribution, and grid modernization, with investments aimed at infrastructure resilience and energy efficiency. PEG operates under long-term regulatory frameworks that support cost recovery and stable returns. PEG’s dense, urban-suburban customer base provides consistent demand across economic cycles. Its capital-light structure and predictable cash flows position it as a defensive play in uncertain macro environments, with modest long-term earnings growth driven by regulated infrastructure upgrades and clean energy transition goals.
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Power in Restraint
Public Service Enterprise Group (PEG) has roots dating back over a century and was formed through the consolidation of electric and gas utilities serving New Jersey’s growing population. From its earliest days, the company operated under public oversight, with state regulators guiding expansion and rate-setting. Over the 20th century, PEG gradually grew by acquiring smaller utilities, building out regional infrastructure, and solidifying its position as a key utility provider in the Northeast.
The company’s modern shape began to emerge in the early 2000s when PEG restructured to separate its regulated utility operations from its competitive generation business. This strategic focus on core utility services laid the groundwork for long-term stability. By the mid-2010s, PEG was investing heavily in infrastructure upgrades, with backing from the New Jersey Board of Public Utilities to modernize its electric and gas networks and improve system resilience.
From 2014 to 2024, PEG launched a series of long-duration investment programs to replace aging pipelines, upgrade substations, and reinforce the grid against weather-related outages. While some of these initiatives were framed around compliance with evolving state and federal environmental rules, PEG maintained profitability and rate stability through careful coordination with regulators. Rather than chasing policy trends, the company focused on predictable capital deployment tied to approved recovery mechanisms.
A major strategic milestone came with the sale of PEG’s merchant generation assets, allowing the company to exit volatile wholesale markets and become a fully regulated utility. This reduced earnings variability and strengthened PEG’s risk profile.
Throughout the past decade, PEG has maintained a steady course: reinvesting in its core infrastructure, working within regulatory frameworks, and delivering consistent service across a dense, economically diverse service territory. Its discipline, limited exposure to industrial volatility, and alignment with long-term utility fundamentals have made it one of the most stable and quietly reliable operators in the sector.
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Shelter From the Storm
In an environment defined by global trade uncertainty, fragile consumer confidence, and elevated inflation, PEG stands out not for aggressive growth – but for its insulation from volatility. With a business model centered on regulated electric and gas distribution in New Jersey, the company is structurally protected from many of the forces now shaking the broader market.
PEG’s customer base is anchored in residential and small commercial accounts across a dense, urban-suburban territory. Demand for power and gas from these users is highly inelastic, even in downturns. Households may cut back on discretionary purchases, but utility bills remain a priority. Unlike utilities tied to Gulf Coast energy infrastructure or industrial hubs, PEG has minimal exposure to cyclical demand from manufacturers, refiners, or exporters. That insulation matters when capital expenditure plans are being shelved across the economy and electricity-intensive operations are scaling back usage or delaying projects.
Unlike merchant generators or hybrid utilities that rely on wholesale price spreads, PEG earns regulated returns based on capital deployed in its local grid and gas networks. With no reliance on commodity trading, no exposure to generation volatility, and limited dependence on global supply chains for its current projects, the company faces less pressure from cost spikes tied to tariffs or import restrictions. Its capex plan, while significant, is composed of long-term, regulator-approved infrastructure upgrades with cost recovery mechanisms already in place.
Should recession take hold, PEG’s earnings remain anchored to the essential services it provides. Should inflation persist, the company has a track record of working through established channels to adjust rates and preserve margin. And if both scenarios play out simultaneously – stagflation driven by policy missteps or supply chain fragmentation – PEG is precisely the type of asset that institutional capital tends to favor: boring, predictable, and indispensable.
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Designed to Endure
PEG’s financial profile reflects its core identity as a low-volatility, infrastructure-first utility. While not positioned for hypergrowth, the company has delivered a steady climb in earnings – and over the past three years, diluted GAAP EPS has compounded at over 40%, a figure boosted by non-recurring items including tax credits, pension adjustments, and asset-related gains. Stripping out that volatility, non-GAAP operating EPS has grown at a more sustainable 7% CAGR, reflecting the solid underlying earnings power of its regulated utility business.
In fiscal 2024, PEG reported non-GAAP operating EPS of $3.68, a 7.9% increase year-over-year. On a total non-GAAP basis (which includes but adjusts beyond operating income), EPS rose 12% year-over-year in Q4 and 9% for the full year. The gap between these two measures primarily reflects favorable but non-operating drivers, such as nuclear production tax credits and lower pension costs – both material, but not reflective of core rate-based operations.
PEG met its 2024 guidance range without issuing equity or monetizing strategic assets – a discipline that continues to set it apart in the sector. Management attributes this to a mix of regulatory stability, efficient capital allocation, and structural tailwinds from previously de-risked cash flows.
Looking ahead, PEG has reaffirmed its 5-7% non-GAAP operating EPS growth target through 2029, supported by $21 billion to $24 billion in planned regulated capital investments. These investments focus primarily on local transmission and distribution infrastructure, grid resiliency, and gas system modernization.
Importantly, PEG retains the flexibility to slow capex if needed in response to macro conditions without undermining its earnings trajectory – a critical advantage in a trade-disrupted, inflation-sensitive environment. In a market increasingly shaped by uncertainty, PEG offers a differentiated profile: steady earnings, no exposure to commodity volatility, and a regulatory structure that enables predictability.
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Paid to Wait
Public Service Enterprise’s stock has gained approximately 30% over the past year, placing it in the middle of the performance pack among regulated East Coast and Mid-Atlantic electric utilities. This steady climb has brought PEG’s valuation slightly above the broader Utility sector average, though it remains in line with peers – and supported by stronger profitability metrics than most.
Analysts currently forecast further upside of 8.4% over the next 12 months, a higher expectation than for most of its closest peers. But more telling than upside projections is PEG’s price behavior under stress. During the height of the recent “tariff shock,” when equities broadly sold off on trade war escalation, PEG declined less than its peer group and rebounded faster — even before the 90-day tariff delay was announced. That resilience reflects its limited exposure to global trade and macro-sensitive demand, as well as its clean, regulated business model.
Beyond price appreciation, PEG offers a reliable and attractive dividend profile. The company has paid dividends consistently for nearly four decades and has increased its quarterly payout for 14 consecutive years, averaging 5% annual growth. The most recent increase came in March 2025, lifting the dividend to $2.52 annually, or a yield of 3.15% – modestly above the sector average.
With a conservative payout ratio and a clear path to growing regulated earnings, PEG’s dividend remains well-covered under both base-case and stress scenarios. In an uncertain environment, it provides not just income, but confidence.
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Investing Takeaway
Public Service Enterprise Group is a fully regulated utility anchored in New Jersey, providing essential electric and gas service to over four million customers. Its business model is built on long-term rate frameworks and low economic sensitivity. With a capital-light structure and dense residential footprint, PEG delivers consistent earnings and cash flow across cycles. Recent EPS growth has been solid, and management maintains a 5-7% annual earnings growth target supported by regulator-approved infrastructure investments. PEG’s valuation remains reasonable, with a strong record of dividend growth and a yield above the sector average. In a market defined by volatility and policy risk, PEG offers stability, income, and disciplined execution – making it a strong candidate for quality-focused, long-term portfolios, especially during times of tumult.1
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Smart Investor’s Winners Club
The 30% Winners Club includes stocks from the Smart Investor Portfolio that have risen at least 30% since their purchase dates.
The markets ebbed and flowed, and our list of winners has grown by one. With IBKR rejoining our exclusive club, it now includes 11 stocks: GE, AVGO, TPL, ANET, HWM, EME, ORCL, TSM, APH, and PH.
The first contender is now BRK.B with 25.1 2 % gain since purchase. Will it stage a comeback, or will another stock outrun it to the finish line?
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Disclaimer
The information contained in this article represents the views and opinions of the writer only, and not the views or opinions of TipRanks or its affiliates and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices, or performance.
