On Thursday, Scotiabank (TSX:BNS) analyst Andrew Weisel adjusted the price target on Eversource Energy (NYSE:ES) stock, reducing it to $55.00 from the previous $56.00 while maintaining a Sector Underperform rating. The revision follows Eversource's fourth-quarter financial update, which according to Weisel, presented several concerns that could impact the company's performance. The utility company, which boasts a notable 5% dividend yield and has maintained dividend payments for 27 consecutive years according to InvestingPro data, currently trades at $59.72.
Eversource Energy's latest earnings report for the fourth quarter of 2024 revealed earnings per share (EPS) of $1.01, aligning with Scotiabank's forecast and surpassing the consensus estimate of $0.99. Despite this, Weisel expressed a bearish stance on the utility company, citing a mix of below-average growth prospects, challenging regulatory relationships in Connecticut, and a strained credit profile, though he acknowledged that progress was being made. InvestingPro's analysis shows the company maintains a "Fair" overall financial health score, with particularly strong marks in price momentum.
The analyst pointed out that the 2025 earnings guidance and capital expenditure updates from Eversource were slightly below expectations. Additionally, the company's equity needs were somewhat greater than anticipated, and the timeline for the sale of its Aquarion water service company has been delayed compared to prior expectations. With a debt-to-equity ratio of 1.9 and operating with moderate debt levels, the company's financial structure remains a key focus for investors. Discover more detailed insights and metrics with InvestingPro's comprehensive research report, available for over 1,400 US stocks.
Weisel's decision to lower the EPS estimates by approximately 2% and trim the price target by $1 reflects these incremental negative details. He emphasized the lack of near-term catalysts that could lead to a positive re-rating of the stock. With Eversource expected to engage extensively with Connecticut regulators in 2025, the analyst foresees potential further difficulties ahead.
Despite Eversource Energy's stock trading at a roughly 30% price-to-earnings (P/E) discount to the median of Scotiabank's utility coverage, Weisel remains cautious. He commended the company's proactive approach to addressing some key challenges but concluded that the risk/reward profile for the stock remains unattractive at this time. According to InvestingPro's Fair Value analysis, the stock appears to be undervalued at current levels, with analyst price targets ranging from $47 to $87.
In other recent news, Eversource Energy has been in the spotlight for a range of developments. The company was recently added to the S&P 500 Dividend Aristocrats, an index of companies with a history of raising their dividends for at least 25 consecutive years. This addition followed a notable increase in Erie Indemnity’s quarterly net income, which rose by 22.0% year-over-year in Q3 2024.
Eversource Energy also acquired a 26-acre site from Constellation Energy (NASDAQ:CEG), a move aimed at enhancing the region's clean energy capabilities and grid reliability. The site is expected to serve as a vital interconnection hub for various large-scale renewable energy sources.
However, the company's shares were downgraded by Scotiabank from 'Sector Perform' to 'Sector Underperform,' with the bank also reducing its price target for the company's shares. This downgrade was due to several challenges that Eversource is expected to face, including extensive engagements with regulators and a below-average earnings per share growth outlook.
In addition to these developments, Eversource Energy also announced an amendment to its executive retirement plan, as detailed in a recent 8-K filing with the Securities and Exchange Commission. Lastly, Jefferies initiated coverage on the utility company with an Underperform rating, pointing out several potential risks that could impact Eversource Energy's financial performance.
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