Dominion Energy's Relative Underperformance: Is the Market's Expectation Gap Priced In?

The market is sending a clear signal about where growth is being priced. While the broader S&P 500 Utilities sector is riding a wave of optimism, Dominion Energy's stock is stuck in neutral. Year-to-date, the stock is down 1.3%, a stark contrast to the sector's 20.25% gain. Over the past 12 months, the disconnect is even more pronounced: Dominion has returned +8%, lagging far behind the S&P 500's +19% climb. This isn't just a minor lag; it's a performance gap that suggests the market's explosive expectations for the utility sector are not being reflected in Dominion's valuation.

The stock's technical picture reinforces this underperformance. Trading at $57.80, it sits just 7% below its 52-week high of $62.87. That proximity to a peak, while the sector soars, frames the situation as an expectation gap. The market is pricing in a transformative growth cycle for utilities, driven by AI and electrification, but Dominion's stock action implies investors see less of that upside here. The sector's narrative of a "biggest growth in decades" is not translating into a premium for this specific stock. For now, Dominion is being treated as a steady, regulated utility, not the high-growth utility of the AI era.

The February Print: Whisper Numbers and the Guidance Reset

The market's patience for underperformance is running out. With Dominion's stock stuck in a narrow range, the February 23 earnings call is the first major catalyst to test whether the company can close the expectation gap. The consensus is clear: investors are looking for a beat. For the fourth quarter, analysts expect EPS of $0.70, a 20.7% year-over-year jump, and revenue of $3.69 billion, up 8.5%. For the full year 2026, the forecast is for earnings of $3.40 per share, signaling a 22.7% growth rate from 2025.

This sets the stage for a classic "beat and raise" or "guidance reset" dynamic. Given the stock's lag, simply meeting these numbers may not be enough to spark a rally. The market has already priced in a certain level of growth; the real question is whether Dominion can exceed the whisper numbers that often float above the official consensus. A strong beat on both top and bottom lines could force a re-rating, but the bigger test will be management's forward guidance.

The upcoming call is Dominion's first major opportunity to address the sector's explosive narrative. If the company can point to concrete projects, like its offshore wind developments, that are accelerating the AI-driven energy transition, it might justify a premium. However, if guidance for 2026 remains conservative or hints at continued pressure from regulatory or cost headwinds, it could confirm the market's view of Dominion as a steady utility, not a high-growth utility. The February print will determine if the expectation gap is about to narrow-or widen further.

Catalysts and Risks: Closing the Expectation Gap

The forward path for Dominion hinges on its ability to bridge the expectation gap. The sector's tailwinds are structural and powerful. The US utilities sector is entering its biggest growth cycle in decades, driven by AI and electrification. This is reflected in Q3 2025 EPS growth of 23.1% and projected 2026 growth of 9.1%. For Dominion, the risk is that its regulated utility model, while stable, may not capture the full upside of this surge. If the company merely meets the consensus growth forecast for 2026, it could trigger a "sell the news" reaction, as the market has already priced in a certain level of expansion.

The key catalysts will be management's articulation of a clear path to leverage these sector tailwinds. Investors need to see confidence in capital allocation, particularly around clean energy investments. Commentary on accelerating offshore wind projects or other growth initiatives will signal whether Dominion sees itself as a growth utility, not just a regulated one. The February earnings call is the first major test of this narrative.

On the flip side, risks remain. The company's 12-month underperformance relative to the S&P 500 suggests the market is skeptical. If guidance for 2026 is in-line with the current consensus but lacks a compelling growth story, the expectation gap could widen further. The bottom line is that Dominion must do more than just participate in the sector's boom; it must demonstrate it can outperform it. The coming quarters will show if the company can close the gap or if its stock will continue to trade on its own steady, but less glamorous, merits.