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Eversource (ES) Benefits From Investment & Renewable Focus

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Eversource Energy (ES - Free Report) , an energy delivery company, provides reliable electric, natural gas and water services to more than 4.4 million customers in the United States.

This Zacks Rank #3 (Hold) stock is exposed to stringent regulations and the adverse impact of rising interest rates on margins.

Tailwinds

Eversource pursues organic growth to expand operations. It is currently focused on upgrading its electric distribution and transmission infrastructure. The company forecasts a capital investment of $21.5 billion during 2023-2027 period, out of which it plans to invest $14.2 billion in electric and natural distribution networks and $5.3 billion in its electric transmission segment. It has planned to make clean energy investments of $2 billion during 2023-2027 period to strengthen its renewable portfolio.

The company diversified operations and forayed into the water business through the acquisition of Aquarion Water Company in December 2017. Since the water industry has huge prospects, ES is planning to further expand water operations through acquisitions. During the 2023-2027 period, $1.02 billion is planned to be invested in the water distribution business to further strengthen operations and serve the expanding customer base more efficiently.

Eversource decided to monetize few offshore wind projects but has plans to generate more clean energy to reduce emission. ES’ regulated companies are building many of the facilities that will enable more than 9,000 megawatts of offshore wind generation to reach the homes and businesses of Southern New England.

Headwinds

The $1.6 billion Northern Pass transmission project of Eversource Energy is finally shelved after the New Hampshire Supreme Court upheld the state Site Evaluation Committee’s 2018 denial of the project. The company has no way to take this 192-mile transmission project forward, as this will hurt its growth plans.

The company’s operations are subject to federal, state and local legislative requirements, as well as extensive environmental regulations. The introduction of new mandates could impact the financial performance of the company.

Price Performance

In the last three months, shares of Eversource have lost 10.6% compared with the industry's decline of 5.5%.

 

Zacks Investment Research
Image Source: Zacks Investment Research

Stocks to Consider

A few better-ranked stocks in the same industry are Otter Tail Corporation (OTTR - Free Report) , Vistra Corporation (VST - Free Report) and FirstEnergy Inc. (FE - Free Report) . Otter Tail and Vistra are currently sporting a Zacks Rank #1 (Strong Buy) each and FirstEnergy is carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Otter Tail’s 2023 earnings per share (EPS) is pinned at $5.79, implying an increase of 22.9% in the past 60 days. Otter Tail reported average positive earnings surprise of 31% in the trailing four quarters.

The Zacks Consensus Estimate for Vistra’s 2023 EPS is pinned at $3.11, implying an increase of nearly 1% in the past 60 days. The current dividend yield of the company is 2.57%, which is higher than the Zacks S&P 500 Composite’s yield of 1.63%.

The Zacks Consensus Estimate for FirstEnergy’s 2023 EPS is pinned at $2.53, implying an increase of 0.8% in the past 60 days. Long-term (three to five years) earnings growth of the company is pinned at 6.45%.

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