Eversource Energy (ES): Return to Profitability Complicates Bearish Narratives on Earnings Quality

Eversource Energy (ES) posted a nuanced set of financial results as reported in its latest filings. Over the past five years, earnings have declined at an average rate of 24.8% per year. However, the company managed to return to profitability in the most recent year, aided by the effects of a non-recurring $764.7 million loss that weighed on the quality of reported EPS. While revenue is forecast to grow at 5.3% per year and annual earnings growth is estimated at 6.13%, both figures trail the broader US market. This reflects a cautious setup for investors this season.

See our full analysis for Eversource Energy.

The next section puts these headline numbers up against the most widely followed narratives. It reveals which stories hold up and which ones might need a closer look.

See what the community is saying about Eversource Energy

Margins Expected to Double Amid Investment Push

• Analysts expect net profit margins to rise significantly, moving from 6.6% today to 14.1% within three years, underpinning an anticipated climb in earnings.
• According to the analysts' consensus view, this margin expansion hinges on sustained spending in grid modernization and advanced infrastructure, with several factors at play:
  • Accelerated investments in projects like battery storage and substation upgrades are forecast to drive operational efficiency and cost reductions, directly lifting net margins.
  • The consensus narrative points out supportive regulations and recent favorable rate case outcomes, which enhance cost recovery, as major enablers for more predictable profit margins and a steadier long-term earnings profile.
  See how analysts are weighing these catalysts and the full consensus perspective on the path forward. 📊 Read the full Eversource Energy Consensus Narrative.

Balance Sheet Hinges on Asset Sales and Securitization

• The company’s planned sale of its Aquarion water business and proposed storm cost securitization in Connecticut are both critical for strengthening its financial position and reducing the need for equity issuances.
• Analysts' consensus view highlights some real risks to this stabilization effort:
  • Delays or setbacks in executing these asset sales or in the approval of storm cost recovery could force Eversource to take on more debt or issue new equity, ultimately pressuring net margins and potentially diluting current shareholders.
  • Regulatory outcomes, especially in Connecticut where the climate has grown more challenging, will be decisive in shaping both the speed and certainty of any improvement in the company’s funding mix and credit standing.

Valuation Sits Between Fair Value and Peer Premium

• At a share price of $72.91, Eversource is trading below its DCF fair value of $346.39, yet appears more expensive than the average US Electric Utilities sector when looking at its current price-to-earnings ratio of 27.6x compared to the industry’s 19.9x.
• Analysts' consensus view interprets this valuation gap as a direct reflection of moderate growth forecasts and recent earnings volatility:
  • Despite the “discount” to DCF fair value, the narrow spread between the share price and the analysts’ official price target of $75.67 (just a 3.8% implied upside) signals that most analysts see the company as fairly valued right now, with limited room for outperformance.
  • Several contextual factors, like the soft revenue growth outlook and unresolved major risks, help explain why the market isn’t assigning a higher premium, even though some peer-relative metrics look favorable.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Eversource Energy on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your Eversource Energy research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

See What Else Is Out There

Eversource’s growth outlook is moderate. Its valuation appears stretched compared to peers, and ongoing balance sheet moves add extra uncertainty for investors.

If you’re seeking greater financial strength and stability, check out solid balance sheet and fundamentals stocks screener (1979 results) where you’ll find companies with healthier balance sheets built to weather market stress.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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