Eversource Energy’s ES systematic capital investment plans should further improve its infrastructure and help in the expansion of renewable operations. This should drive the company’s overall performance. ES is also set to benefit from the expansion of its water business through acquisitions.
However, this Zacks Rank #3 (Hold) company is exposed to stringent regulations and substandard performance from third parties that act as headwinds.
Tailwinds
Eversource operates a capital-intensive business with relatively steady revenue streams. Its capital investments serve as a proxy for future organic growth. The company expects capital investments worth $23.1 billion during 2024-2028, out of which it plans to invest nearly $16.1 billion in electric and natural gas distribution networks, and $7.2 billion in the electric transmission segment.
Systematic expenditure is enabling the company to expand and strengthen transmission and distribution operations, as well as efficiently serve electric and natural gas customers. The company is also focused on improving the quality of water services provided to customers in Connecticut. During the 2024-2028 period, $1.1 billion is planned to be invested in the water distribution business.
In April 2024, ES finalized definitive documents regarding its previously announced agreement to sell its 50% ownership stake in the 924-megawatt Sunrise Wind project to Ørsted. Despite its exit from the unregulated wind business, it is fully committed to clean energy transition, with its regulated companies building many of the facilities that will enable more than 9 gigawatts of offshore wind generation to reach the homes and businesses of Southern New England.
Headwinds
The company’s operations are subject to federal, state and local legislative requirements, as well as extensive environmental regulations. Any modification in the existing regulations or introduction of new mandates might affect its financial performance.
Eversource outsources certain business functions to third-party suppliers and service providers. Substandard performance by these third parties could harm its business, reputation and results of operations.
Price Performance
In the past three months, shares of the company have risen 7.8% against the industry’s 0.1% decline.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the same industry are American Electric Power AEP, DTE Energy DTE and Exelon Corporation EXC, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AEP’s long-term (three to five years) earnings growth rate is 6.24%. The Zacks Consensus Estimate for 2024 earnings per share (EPS) indicates a year-over-year increase of 6.5%.
DTE’s long-term earnings growth rate is 8.14%. The Zacks Consensus Estimate for 2024 EPS indicates year-over-year growth of 16.9%.
EXC’s long-term earnings growth rate is 5.66%. The Zacks Consensus Estimate for EXC’s 2024 EPS indicates a year-over-year improvement of 2.5%.
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