PEG Shorts Retreat Sharply Ahead of Q3 Results

Public Service Enterprise Group, the New Jersey-based electric and gas utility, reports Q3 earnings on November 2 against a backdrop of sharply reduced short positioning and recovering share price momentum.

The most striking change since the previous note ten days ago is a reversal in short interest. What was then climbing to a one-year high has since collapsed by nearly 30% in a week, falling from around 12.5 million shares to roughly 8.8 million, or 1.8% of free float. That drop is more than three standard deviations below the typical weekly move for this stock over the past year, making it an unusually large unwind rather than routine noise. The borrow market was already extremely loose, with hundreds of millions of shares available to lend and a cost to borrow of just 0.28%, and that picture has not changed. Options positioning leans bullish: the put/call ratio of 0.19 is near its 52-week low and about one standard deviation below its 20-day average, meaning call activity is dominant going into the print. The stock has gained 10% over the past month, closing at $73.63 on Thursday, and has kept pace with peers this week, with DTE, CNP and WEC posting gains of between 1.4% and 3.1%.

Analysts have been trimming targets but not ratings in the run-up. Morgan Stanley and B of A Securities both cut price targets this week while holding Overweight and Buy ratings respectively. JPMorgan lowered its target to $77 from $81 last week, staying at Neutral. HSBC initiated with a Hold and a $72.50 target. The pattern is consistent: the Street still sees upside to consensus of roughly $81, about 10% above the current price, but is becoming more selective about the size of that gap. The bull case rests on a growing backlog of large-load power inquiries, now at 9.4 gigawatts from 6.4 gigawatts, higher rate base growth, and improving long-term contract pricing tied to data centre demand. The bear case centres on investor scepticism over a stalled major data centre deal, the drag from elevated interest rates on utility valuations, and a quieter near-term catalyst calendar. The 12-month forward earnings growth rank sits in the 93rd percentile of the universe, but recent EPS momentum over the past 30 and 90 days scores in the bottom third, suggesting analysts have raised long-run expectations without revising near-term numbers upward.

One signal from the ORTEX Alt Data layer is worth noting. Nuclear output from PEG's reactors, tracked daily via US Nuclear Regulatory Commission data, is running at a z-score of negative 4.8 against the units' own trailing history as of October 26, a deeply anomalous reading that points to material output reduction or outage activity. None of the three datasets tracked for PEG carry a measured lead against reported financials, so no direct inference about the Q3 print is warranted. But nuclear generation is a direct revenue and margin input, and the degree of deviation from normal output is notable context for a company with significant nuclear exposure.

The Q3 print will test whether the utility and power segments can sustain the earnings growth trajectory reported last quarter, and whether management has anything new to say about large-load demand and the collocated data centre opportunity that has been a central point of debate.