On Nov 24, 2016, we issued an updated research report on Eversource Energy ES. Eversource Energy’s consistent investments in growth projects and cost saving initiatives are leading to a strong financial performance. However, unfavorable weather fluctuations, along with increasing stringency of state and local legislative mandates may limit the company's prospects.
Eversource Energy’s third-quarter operating earnings and revenues were higher than the respective Zacks Consensus Estimate. The primary bottom-line driver was a higher transmission rate base. We believe systematic investments in infrastructure development projects, primarily in transmission and distribution systems, will help the company offer reliable services to its customers.
Eversource Energy pursues organic growth to expand its operations. The company is currently focused on upgrading its distribution and utility transmission infrastructure. Eversource Energy has plans to invest $9.2 billion in the 2016–2019 timeframe. These regulated investments will help the company to boost its earnings per share by 5% to 7% over the 2016–2019 period from the 2015 level of $2.81.
Eversource Energy has also been efficiently managing its expenses. The company achieved an overall average reduction of 5% in operating and maintenance expenses over the last three years, surpassing its annual goal of 2% to 3%. These initiatives boost its margins. In the first nine months of 2016, Eversource Energy’s cost savings contributed 7 cents to the company’s bottom line.
On the flip side, Eversource Energy faces challenges from severe weather conditions and natural calamities like hurricanes and snowstorms, causing breakdown and damage of transmission and distribution lines, and disrupting normal operations. For instance, milder weather in the beginning of the year led to a decline in the demand for natural gas in the company’s service territories.
Moreover, 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 modification in existing regulations and introduction of new mandates could impact the financial performance of the company.
Zacks Rank & Key Picks
Eversource Energy currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are NextEra Energy NEE, DTE Energy Company DTE and Ameren Corporation AEE. All these stocks presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NextEra Energy’s earnings surpassed the Zacks Consensus Estimate by 5.5% in the third quarter of 2016. Its estimates for the current year increased 0.6% in the last 60 days.
DTE Energy’s earnings beat the Zacks Consensus Estimate by 27.3% in the third quarter of 2016. Its estimates for the current year moved up 3.9% in the last 60 days.
Ameren Corp.’s earnings outpaced the Zacks Consensus Estimate by 10.1% in the third quarter of 2016. Its estimates for the current year increased 6.7% in the last 60 days.
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