Company Reports

We confirm our EUR 12 fair value estimate after no-moat Iberdrola released first-quarter results boosted by the sale of a good chunk of Mexican assets and raised its 2024 net profit guidance. Shares are in 3-star territory. The current dividend yield is 4.8%, in line with the sector's median. Still, the company has a more attractive earnings and dividend outlook than most peers.

Iberdrola is the second-biggest integrated utility in Europe after Enel. Besides its domestic Spanish market, Iberdrola has strong exposure to the United Kingdom since the acquisition of Scottish Power in 2007. It is the European utility with the largest exposure to the United States thanks to its wind development and the acquisition of UIL in 2015. Its US assets are grouped in 81.5%-owned Avangrid. In March 2024, Iberdrola proposed to acquire the rest of Avangrid for $34.25 per share, just above our fair value estimate of $33 at the time. We expect the deal to be completed at $36 by the end of 2024.

We maintain our EUR 12 fair value estimate after no-moat Iberdrola set its 2026 financial targets and expanded investment in networks versus its prior plan. Management is also reducing renewables spending further as the group failed to meet its capacity addition targets since 2020. Shares look fairly valued.

European utilities have reversed their outperformance in the fourth quarter of 2023 because of a fall in wholesale power prices in the wake of gas prices after a very mild winter, and a pickup in interest rates due to inflation receding more slowly than expected. The former led to some of the companies, most exposed to power prices, cutting their guidance for 2024.

We confirm our EUR 12 fair value estimate after no-moat Iberdrola proposed on March 6 to acquire the 18.4% of shares that it does not own in its U.S. subsidiary Avangrid for $34.25 per share in cash and implying a 10% premium over the volume-weighted average price of the last 30 days. The completion of the transaction is subject to approval by the boards of directors for Iberdrola and Avangrid as well as the majority of holders of shares not owned by Iberdrola. We don't think Iberdrola will get the latter given the lukewarm premium. Therefore, we believe that Iberdrola will likely raise its offer given its financial headroom after Avangrid terminated the agreement to acquire PNM Resources for $8.3 billion in January. In any case, the deal makes strategic sense.

We confirm our EUR 12 fair value estimate after no-moat Iberdrola released 2023 results in line with the latest guidance and set 2024 guidance above our expectations. The firm intends to pay a EUR 0.55 dividend per share on 2023 results, 11% above last year and implying a 5% yield. It will hold a capital market day on March 21 where it will update and roll over its financial targets set in November 2022. Some downward adjustment is likely after the failure to acquire PNM Resources and the fall in wholesale power prices, although Iberdrola's sensitivity to the latter is well below most other European diversified utilities. Shares are in 3-star territory. We see more upside in peers Enel or Engie.

We confirm our EUR 12 fair value estimate after no-moat Iberdrola's U.S. subsidiary Avangrid terminated the agreement to acquire U.S. utility PNM Resources for $8.3 billion. This outcome is in line with what we and the market expected. Hence, the flat share price the day of the news. Shares appear fairly valued.

European utilities are up by 14% year to date, slightly underperforming the broader European markets. Since the end of September, the sector strongly outperformed thanks to the rally in government bonds and solid third-quarter results that drove multiple guidance upgrades although growth slowed down from the second quarter due to higher comps. All in all, companies that are the most exposed to commodity prices are set to exceed their 2022 record profits in 2023. Meanwhile, firms with big retail businesses that were hit by a margin squeeze because of the energy crisis in 2022 will post a significant rebound in earnings.

Iberdrola is the second biggest integrated utilities in Europe after Enel. It is the European utility with the largest exposure to the United States due to its wind development and the acquisition of UIL in 2015. Its U.S. assets are now grouped in 81.5%-owned Avangrid. In Europe, besides the domestic Spanish market, Iberdrola has a strong exposure to the United Kingdom since the acquisition of Scottish Power in 2007.

We don't expect to materially change our EUR 11.60 fair value estimate after no-moat Iberdrola released good nine-month results and raised its 2023 net profit growth guidance for the third time in a row. The interim dividend for 2023 is set at EUR 0.20 per share, 11% above last year and close to our 13% growth in total dividend. Our estimate implies a 5.2% yield, reflecting the attractiveness of the shares after the sector selloff driven by rising interest rates. Arguably, investors can get the same income by investing in government bonds. However, we expect average annual dividend growth of 4% by 2027 for Iberdrola covered by a similar earnings growth, both well above the sector median.

European utilities have underperformed the European market by 4% year to date with most of the underperformance occurring in the third quarter because of the rise in interest rates. This overshadowed strong second-quarter results driven by the easing of the energy crisis, persisting commodity price volatility, and the hedging improvement. These drivers have persisted in the third quarter. Moreover, some power price clawbacks expired at the end of June like in Germany and Belgium. On the flip side, the comparison basis will be tougher as of the third quarter.

No-moat Iberdrola released solid first-half results and raised its 2023 net profit growth guidance for the second time in a row thanks to a positive one-off in the U.K. We maintain our EUR 11.60 fair value estimate and currently view shares as fairly valued.

Iberdrola is the biggest Spanish utility and one of the biggest integrated utilities in Europe. It is the European utility with the largest exposure to the United States due to its wind development and the acquisition of UIL in 2015. Its U.S. assets are now grouped in 81.5%-owned Avangrid. In Europe, besides the domestic Spanish market, Iberdrola has a strong exposure to the United Kingdom since the acquisition of Scottish Power in 2007.

We are currently maintaining our fair value estimate of EUR 10.60 for no-moat Iberdrola after the firm released first-quarter results above expectations. We currently view shares as fairly valued.

We don't expect to materially change our EUR 10.60 fair value estimate after no-moat Iberdrola announced it reached an agreement to sell most of its Mexican combined cycle gas turbines, or CCGTs, to Mexico Infrastructure Partners, an infrastructure fund backed by the Mexican government, for $6 billion, in line with our valuation. Further, we are not unhappy to see the company slashing its exposure to a country where it was facing growing hostility from the government. The deal is expected to be closed by year-end pending final agreements and regulatory approvals. Shares are in 3-star territory.

We maintain our fair value estimate of EUR 10.60 after no-moat Iberdrola released good 2022 results, albeit slightly shy of FactSet consensus, and set 2023 guidance in line with expectations. The firm will pay a dividend of EUR 0.49 per share on 2022 earnings, 11% higher than the year before and implying a 4.5% yield, in line with the sector average. Shares appear fairly valued. We see more value in peers Engie, EDP, or Enel.

Iberdrola is the biggest Spanish utility and one of the biggest integrated utilities in Europe. It is the European utility with the largest exposure to the United States due to its wind development and the acquisition of UIL in 2015. Its U.S. assets are now grouped in 81.5%-owned Avangrid. In Europe, besides the domestic Spanish market, Iberdrola has a strong exposure to the United Kingdom since the acquisition of Scottish Power in 2007.

We maintain our EUR 10.6 fair value estimate after no-moat Iberdrola updated its 2025 financial targets and trimmed its renewables ambitions in favor of networks. This is not surprising because the group never met its capacity additions targets since 2020 due to permitting issues and supply chain disruptions. However, this is a turning point that could be emulated by peers like Enel, Engie and EDP. Iberdrola also claims to take a more selective approach in its renewables investments, which we commend in light of the current headwinds, that is rising construction costs and interest rates. Shares look fairly valued.

We maintain our fair value estimate of EUR 10.60 after no-moat Iberdrola released a good set of nine-month results and confirmed its 2022 guidance. Shares appear fairly valued. We see more value in peers Engie or EDP.

We maintain our EUR 10.60 fair value estimate after no-moat Iberdrola released solid first-half results and confirmed its 2022 guidance. This good set of results reflects the favorable positioning of the business mix against high inflation. However, this enviable feature is shared by most other European diversified utilities including Enel and Engie, which are more undervalued than Iberdrola.