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Eversource (ES) Down to Sell: Regulations Hurt Prospects

Zacks

On Sep 15, 2016, Zacks Investment Research downgraded Eversource Energy ES to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Hold).

The company’s performance depends largely on environmental regulations, weather fluctuations in its service territories, and modifications in state and local legislations.

Why the Downgrade?

Eversource Energy’s operations are subject to federal, state and local legislative requirements, as well as extensive environmental regulations related to the emission of greenhouse gases and carbon dioxide, air and water pollution, and waste management. Any unfavorable modification in the existing regulations and introduction of new mandates could impact the financial performance of the company.

Moreover, adverse weather conditions and natural calamities, like hurricanes and snowstorms, may lead to the breakdown and damage of transmission and distribution lines, thus disrupting normal operations of the company. For instance, a mild winter in 2016 lowered the demand for natural gas in Eversource Energy’s service territories.

EVERSOURCE EGY Price


EVERSOURCE EGY Price | EVERSOURCE EGY Quote

Again, Eversource Energy’s strategic development endeavors in the electric and natural gas transmission markets may not be successful, and projects may not begin operations or be completed on schedule, which could have a material impact on its prospects. Long-term projects could be postponed due to various factors like a delay in regulatory approval processes, new legislations, difficulties in obtaining required rights of way, and design and siting issues.

Due to these factors, annual estimates have been going down ahead of the company’s third-quarter earnings release. In the last 90 days, the Zacks Consensus Estimate for 2016 declined 0.3% to $2.99, while that for 2017 went down 0.6% to $3.17.

Some better-ranked stocks in the in the utility-electric power industry are Korea Electric Power Corp. KEP, Spark Energy Inc. SPKE and Duke Energy Corporation DUK. Spark Energy and Korea Electric Power sport a Zacks Rank #1 (Strong Buy), while Duke Energy currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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