Mizuho Names Top Picks Across Americas Oil, Gas and Utilities

Mizuho named five Americas energy stock picks with implied upside of ~20% to 65% from current levels, led by Devon Energy (DVN) at a $68 target on its May Coterra merger and cash-flow support (3%–5% higher free-cash-flow yield; Permian gas sales starting 2027 at JKM- and European LNG-linked pricing). The package is also positive for midstream and infrastructure demand tied to AI/data centers and rising U.S. LNG needs, with Energy Transfer (ET) benefiting from AI-driven data center demand and higher LNG requirements and MasTec (MTZ) showing strong results (1Q26 pipeline revenue +91.5% YoY; EBITDA margin 21.2%; record $20.3B backlog). Ameren (AEE) and Permian Resources (PR) round out the list with the former leveraged to signed utility buildout tied to data centers and the latter to breakevens below $55/bbl and a cleaner corporate structure (C-Corp conversion; reduced sponsor overhang).

Analysis

The cleaner takeaway is that capital is rotating from pure commodity beta into infrastructure toll collectors with AI and LNG optionality. ET and MTZ are the best second-order beneficiaries because each incremental data-center or export project creates demand for pipe, compression, civil work, and electrical buildout; that should also lift peers like KMI, WMB, TRGP, PWR, and EME even if they are not named here. By contrast, utilities without fast transmission conversion risk getting treated as backlog stories rather than earnings stories.

DVN and PR are more fragile than the sell-side framing suggests because their rerating case depends on a stable strip and continued capital discipline. The next 1-3 months matter most for DVN: the budget and asset-sale commentary can unlock upside if it lowers sustaining capex or improves balance-sheet optics, but a softer WTI/Henry Hub backdrop would compress the promised FCF advantage quickly. For ET, the near-term test is whether EBITDA guidance keeps stepping up and whether Nederland expansion translates into contracted volumes rather than just headline capacity.

The consensus is probably underestimating how cyclical the AI infrastructure narrative still is. Data-center demand only becomes durable cash flow once interconnects, permits, and utility approvals convert it into contracted load, which makes MTZ the highest-quality expression because it monetizes urgency immediately. AEE is the most timing-sensitive: if the September IRP or contract-to-rate-base conversion disappoints, the multiple can de-rate before any visible slowdown in demand shows up.

Key Decisions for Investors

• Long MTZ vs short XLU for 1-3 months: MTZ has the cleanest backlog-to-revenue conversion from AI and gas buildout, while XLU remains rate-sensitive and vulnerable if the market stops paying up for long-duration utility growth. Target a 2:1 reward/risk if MTZ backlog converts as expected.
• Long ET vs short KMI for 3-6 months: ET has better leverage improvement, more visible LNG/data-center optionality, and a clearer path to capital returns. Falsify the trade if ET does not raise 2026 EBITDA again or if expansion spending starts pressuring leverage.
• Watchlist only on DVN into the mid-June pro forma budget and any asset-sale headlines; add on confirmation of lower capex or meaningful monetization, not on target-price chatter. If WTI falls below the mid-$60s or gas weakens materially, the FCF-yield story likely compresses faster than consensus expects.
• Do not chase AEE until the September IRP clarifies how much of the 2.8 GW pipeline becomes allowed rate base. If signed data-center contracts do not translate into guidance lift, AEE is likely a low-quality "AI exposure" trade and the premium to peers should narrow.
• For higher conviction but lower capital usage, consider a call spread on MTZ into the next backlog/guidance update rather than outright equity; the setup is more about multiple expansion than near-term earnings revisions.