The sector that stormed through the first half of the year in a big way has come under heavy fire in the second half, as the fear of rising rates has made many yield investors sellers, and with good reason. With many of the stocks trading at high-single-digit premiums to historical levels on a price-to-earnings basis, and also at double-digit levels on a price-to-book comparison, the sector is clearly rich.

In a new research report, the analysts at SunTrust acknowledge the high valuations, but they do believe that five companies in their utility universe could beat current earnings estimates for the third quarter. We focus on the five stocks that remain rated Buy, some of which have the potential to beat estimates.

American Electric Power

This industry leader is also a solid dividend-paying company. American Electric Power Co. Inc. (NYSE: AEP) is one of the largest electric utilities in the United States, delivering electricity to more than 5.3 million customers in 11 states. It ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the United States. It also owns the nation’s largest electricity transmission system, a more than 40,000-mile network that includes more 765 kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.

Many on Wall Street feel that the stock trades at a discount to its utility peers and they feel it deserves a premium. The company posted solid second-quarter numbers that exceeded consensus expectations. While industrial sales declined for a third year, it remains a stock the analysts favor.

American Electric Power shareholders are paid a solid 3.56% dividend. The SunTrust price objective for the stock is $73, and the Wall Street consensus target price is at $71.03. Shares closed on Monday at $62.97 apiece.

AES

This company is an off-the-radar choice that has solid upside potential from current levels. The AES Corporation (NYSE: AES) owns and operates power plants to generate and sell power to customers, such as utilities, industrial users and other intermediaries. The company also owns and operates utilities to generate or purchase, distribute, transmit and sell electricity to end-user customers in the residential, commercial, industrial and governmental sectors. It also generates and sells electricity to the wholesale market.

AES uses a range of fuels to generate electricity, including natural gas, coal, hydro, wind, energy storage, oil, diesel, petroleum coke, biomass, landfill gas and solar. The company owns and operates a generation portfolio of approximately 29,352 megawatts. It has operations in the United States, Chile, Colombia, Argentina, Brazil, Mexico, Central America, the Caribbean, Europe and Asia.

AES shareholders are paid a 3.76% dividend. The $15 SunTrust price objective compares with the consensus target price posted at $12.98. The stock closed most recently at $11.71 per share.

Dynegy

This is another solid pick for investors not needing dividend income, but looking for safety and solid capital gains potential. Dynegy Inc. (NYSE: DYN) operates in three segments, Coal, Illinois Power Holdings and Gas. The company sells its services on a wholesale basis from its power-generation facilities. It has a fleet of 35 power plants in eight states, totaling approximately 26,000 megawatts of generating capacity.

The company serves a range of customers, including regional transmission organizations, independent system operators, integrated utilities, municipalities, electric cooperatives, transmission and distribution utilities and power marketers, as well as financial participants, such as banks and hedge funds, and residential, commercial and industrial end-users.

As mentioned, Dynegy currently does not pay a dividend. The SunTrust price target is a whopping $17, and the consensus is even higher at $21.19. The stock ended Monday’s trading at $12.51.

Edison International

This top utility continues to raise its dividend regularly. Edison International (NYSE: EIX) generates electricity through hydroelectric, diesel, natural gas, gas fueled, combustion turbine, nuclear and photovoltaic sources. It supplies electricity primarily to residential, commercial, industrial, agricultural and other customers, as well as public authorities through transmission and distribution networks.

The SunTrust analysts like Edison International as another company that could beat current earnings estimates for the quarter. Edison International remains well positioned to compete in the market place. The company says that the billions it is spending on upgrades goes predominantly to its networks, and that it only owns about 15% of the generation that its customers consume. The other 85% is purchased on the open market.

Edison International investors are paid a 2.7% dividend. The SunTrust price objective is posted at $66. The consensus target price is $81. The stock closed Monday at $71.22.

Exelon

This top utility stock also still makes good sense now for conservative accounts, and it also could beat earnings estimates. Exelon Corp. (NYSE: EXC) is the nation’s leading competitive energy provider, with 2014 revenues of approximately $27.4 billion. Headquartered in Chicago, Exelon does business in 48 states, the District of Columbia and Canada. Exelon is one of the largest competitive U.S. power generators, with approximately 32,500 megawatts of owned capacity comprising one of the nation’s cleanest and lowest-cost power generation fleets.

The company’s Constellation business unit provides energy products and services to more than 2.5 million residential, public sector and business customers, including more than two-thirds of the Fortune 100. Exelon’s utilities deliver electricity and natural gas to more than 7.8 million customers in central Maryland, northern Illinois and southeastern Pennsylvania.

Exelon investors are paid a very solid 3.85% dividend. SunTrust has a $39 price target on the stock. The consensus target is posted lower at $37.94. The stock closed most recently at $32.75 per share.

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While the utility run may be closer to over than even a few months ago, all these stocks have been hammered recently and have bounce-back potential. In addition, they all have decent upside potential to the SunTrust price targets, which could make for a good total return play.

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