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Eversource's (ES) Investment Aids, Project Abandonment Ails

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Eversource Energy (ES - Free Report) will benefit from its solid long-term investment plan to strengthen its transmission & distribution network, add renewable energy projects to its portfolio and execute strategic acquisitions to expand operations.  

However, shelving the $1.6-billion Northern Pass transmission project after failing to get necessary regulatory approvals will definitely impact its long-term growth plans.

Let’s focus on the strengths and weaknesses of this currently Zacks Rank #3 (Hold) stock, which has a long-term (three to five years) earnings growth rate of 6.2%.

Tailwinds

Eversource forecasts capital investment of $18.1 billion within the 2022-2026 time frame. Of the total, ES has plans to invest $11.6 billion between 2022 and 2026 in the electric and natural distribution network. Upgrade, expansion and maintenance of the infrastructure allow ES to efficiently serve its customers.

In addition to its organic initiatives, Eversource is taking the inorganic route to expand its operation. ES entered into an agreement to acquire The Torrington Water Company (TWC), a water distribution company, which will further increase water operations and revenues. Acquisition of natural gas assets from NiSource expanded ES’s natural gas operation, boosted its customer base and was accretive to its earnings.

Eversource Energy and Denmark-based Ørsted proposed to develop the Bay State Wind project. The Eversource/Ørsted partnership is the largest offshore wind developer in North America. Eversource and Ørsted are likely to eventually develop at least 4,000 MW of clean and renewable offshore wind energy.

Headwinds

The $1.6-billion Northern Pass transmission project of Eversource was shelved after the New Hampshire Supreme Court upheld the state Site Evaluation Committee’s rejection of the project. ES can no way take this 192-mile transmission project forward, which will definitely leave an adverse impact on its growth plans.

Eversource outsources certain business functions to third-party suppliers and service providers. Substandard performance by these third parties could harm ES’s business, reputation and operational results.

Price Performance

In the past six months, shares of Eversource have gained 1.9% compared with the industry's 6% rally.

 

Zacks Investment Research
Image Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks in the same sector are Xcel Energy (XEL - Free Report) , WEC Energy Group (WEC - Free Report) and ONE Gas (OGS - Free Report) , all currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term (three to five years) earnings growth rate of Xcel Energy, WEC Energy and ONE Gas is projected at 6.4%, 6.1% and 5%, respectively.

The Zacks Consensus Estimate for 2022 earnings per share of Xcel Energy, WEC Energy and ONE Gas has moved up 7.4%, 4.6% and 5.9%, respectively, from the corresponding year-ago reported figures.

 

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