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Eversource Energy (ES) Hit by Regulatory and Weather Woes


Eversource Energy ES is subject to stringent environmental regulations and inconsistent weather, which are hurting its performance. Given that the company depends on the performance of third parties, substandard performance from them adversely impacts results of Eversource Energy.

However, the company’s planned organic growth investment could help it in overcoming the challenges.

What Lies Ahead?

Eversource Energy’s first-quarter earnings of 82 cents per share lagged the Zacks Consensus Estimate by a penny. However, quarterly earnings were up 6.5% from the year-ago quarter figure of 77 cents. Earnings improved year over year due to higher transmission, and electric and natural gas revenues compared with the previous-year quarter.

Eversource Energy’s operations are subject to federal, state and local legislative requirements, as well as extensive environmental regulations, relating to 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.

Milder weather conditions in first-quarter 2017 affected demand for natural gas in the company’s service territories.

However, Eversource relies on organic growth to expand its operations. It is currently focusing on upgrading its distribution and utility transmission infrastructure. The company has plans of investing $9.6 billion in the 2017 to 2020 time period. These regulated investments will help the company in boosting its earnings per share by 5–7% during the 2017–2020 period from the 2016 level of $2.96.

The company has been able to manage its expenditure efficiently. It achieved an overall average O&M expense reduction of 4–5% in the last four years, exceeding its cost-reduction goal of 3–4% in a year. These cost-reduction initiatives will boost margins. The company will carry on with these initiatives in 2017 as well.

Price Movement

In the last one month, shares of Eversource Energy have lost 0.8% compared with the Zacks categorized Utility – Electric Power industry’s loss of 0.7%.

Its peers like Pampa Energia S.A. PAM and Algonquin Power & Utilities Corp. AQN have gained 2.6% and 2%, respectively.

Zacks Rank and Better-Ranked Stocks

Eversource Energy currently has a Zacks Rank #4 (Sell). A better-ranked stock in the utility space is CenterPoint Energy, Inc. CNP with a Zacks Rank 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CenterPoint Energy, Inc. reported a positive earnings surprise of 2.78% in the first quarter. Its 2017 Zacks Consensus Estimate has moved up nearly 5.3% to 20 cents per share in the last 60 days.

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