It has been about a month since the last earnings report for Eversource Energy (ES - Free Report) . Shares have added about 9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Eversource due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Eversource's Earnings and Revenues Beat Estimates in Q3
Eversource Energy delivered third-quarter 2018 operating earnings of 93 cents per share, surpassing the Zacks Consensus Estimate of 88 cents by 5.7%. The bottom line also improved 13.4% year over year.
GAAP earnings in the reported quarter were 91 cents compared with 82 cents in the year-ago quarter. The difference between GAAP and operating earnings in the reported quarter was due to an impairment charge of 8 cents relating to the company’s investment in the proposed Access Northeast natural gas pipeline project, along with non-recurring tax benefits of 6 cents related to federal and state tax law changes.
Eversource’s third-quarter revenues of $2,271.4 million topped the Zacks Consensus Estimate of $1,968 million by 15.4% and also improved 14.2% from the year-ago figure of $1,988.5 million.
Highlights of the Release
In the reported quarter, electric distribution increased 8.7% year over year to 15,316 Gwh.
Operating expenses increased nearly 20.9% year over year to $1,805.4 million, primarily owing to higher expenses from purchased power, fuel and transmission, plus operation and maintenance costs.
Operating income was down 5.9% to $466.3 million while interest expenses were up 15.2% year over year to $125.2 million.
Net income in the quarter under review was $289.4 million, up 11.1% from the year-ago level.
Electric Distribution: Earnings from this segment were up 10.4% to $173.8 million. The upside was primarily attributable to higher distribution margins.
Electric Transmission: The bottom line of the segment increased 10.6% year over year to $109.5 million. The upside was primarily attributable to higher level of investment in Eversource’s electric transmission system.
Natural Gas Distribution: This segment recorded a loss of $12.6 million compared with $6.2 million in the year-ago quarter. The segment’s unimpressive third-quarter results were primarily due to higher operation and maintenance expenses.
Water Distribution: Eversource’s water distribution segment, created after the company acquired Aquarion Water Company in December 2017, earned $17.6 million in third-quarter 2018.
Eversource Parent & Other Companies: The segment earned $1.1 million compared with the year-ago quarter’s earnings of $10.2 million.
As of Sep 30, 2018, the company’s cash was $59.1 million, up from $38.2 million on Dec 31, 2017.
Its long-term debt was $12.15 billion as of the same date, up from $11.77 billion on Dec 31, 2017.
Cash provided during the first nine months of 2018 in operating activities was $1.40 billion compared with $1.47 billion in the year-ago period.
Eversource reaffirmed its 2018 earnings guidance in the range of $3.20-$3.30. Long-term earnings growth of the company is projected in the 5-7% band.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Eversource has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Eversource has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.