Eversource Energy

ES Details

Eversource Energy (NYSE: ES) is engaged primarily in the energy delivery business through its wholly-owned utility subsidiaries. The distribution segment consists of the distribution businesses of CL&P, NSTAR Electric, and PSNH for retail customers.

Result Performance – For the Second Quarter Ended 30 June 2021

• Reported earnings at $264.5 million, in Q2FY21, versus $252.2 million in Q2FY20.  For H1FY21, earnings stood at $630.7 million, versus $587 million in the H1FY20. The transmission segment earned $137.6 million in Q2FY21 and $273 million in H1FY21, driven by a higher level of investment in Eversource’s electric transmission system.
• The electric distribution segment earned $121.6 million in Q2FY21 and $214.9 million in H1FY21, versus $115 million in Q2FY20 and $245.1 million in H1FY20, primarily driven by higher revenues. The natural gas distribution segment earned $4.1 million in Q2FY21 and $151.6 million in H1FY21, versus $2.6 million in Q2FY20 and $88.6 million in H1FY20.

Key Data (Source: Company Reports) 

Recent Updates

• On 1 September 2021, the company approved a quarterly dividend of $0.6025 per share, payable on 30 September 2021, as per the record date of 16 September 2021.
• As per the release dated 25 August 2021, Ørsted and Eversource announced the commencement of the first American-built offshore wind substation, which is expected to be deployed at the developers’ South Fork Wind project serving New York’s Long Island.

Risks

The company is exposed to cyberattacks that may severely impair operations, negatively impact the business, and could lead to the disclosure of confidential information, and adversely affect the reputation of the company. Further, the unauthorized access to and the misappropriation of the private and proprietary customer, employee, financial, or system operating information could adversely affect the business operations and reputation.

Outlook:

The company remains a steadfast partner in the region’s efforts to develop its infrastructure and reduce its carbon footprint. Further, the company is focused to accelerate multiple innovative clean energy initiatives. The company reaffirmed its previously disclosed 2021 EPS guidance toward the lower end of a range of $3.81-$3.93 per share.

Valuation Methodology: EV/EBITDA Based Relative Valuation (Illustrative)

Stock Recommendation:

The stock posted 6-months and 1-year returns of ~+19.9% and ~+7.1%, respectively. It is currently trading above the average 52-week high price of $96.66 and 52-week low price of $76.64.

The stock has been valued using an EV/EBITDA multiple based illustrative relative valuation method and arrived at a target price which reflects a decline of low double-digit (in percentage terms). The company might trade at a slight discount to its peers’ average, considering a lower ROE at 1.8% in Q2FY21 versus the industry median of 2.0% and an increase in debt to equity at 1.34x in Q2FY21 versus the industry median of 1.12x.

Considering the aforementioned factors, decent returns, current trading levels, and associated risks, we give a “Sell” recommendation on the stock at the current market price of $92.62 per share, up 1.05%, as on 2^nd September 2021.

Daily Price Chart

Source: REFINITIV, Note: The Purple Color Line Reflects RSI (14-Period)

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.