Eversource Earnings: Growth on Track; Deal To Complete Offshore Wind Exit Coming Soon

We are reaffirming our $74 per-share fair value estimate for Eversource ES after the company announced it earned $1.00 per share on an adjusted basis during the second quarter of 2023, up from $0.86 during the second quarter of 2022. We are reaffirming our no-moat rating for Eversource.

Adjusted earnings exclude a $0.95 per share charge Eversource took during the quarter related to the divesture of its offshore wind investments. The charge suggests deal terms and pricing are substantially complete and we expect an announcement soon. We estimate the charge reflects 15%-20% of Eversource’s offshore wind investment to date, in line with the discount we expected Eversource would have to take and already incorporated into our fair value estimate.

Management reaffirmed its 5%-7% annual long-term growth rate, in line with our outlook. Management’s $4.25-$4.43 EPS guidance for 2023, excluding the impairment, is also in line with our outlook. Eversource appears poised to reach the high end of management’s earnings guidance range this year.

Higher electric rates at Nstar in Massachusetts following a major regulatory ruling last year helped boost electric distribution segment earnings by $0.10 in the quarter and nearly 10% in the first half adjusting for rate design change. Higher electric transmission rates also lifted earnings slightly.

We continue to assume Eversource invests at least $17 billion, excluding remaining offshore wind investments, in 2023-26 with additional growth investment potential beyond 2024 depending on regulatory developments, particularly in Connecticut. Cash proceeds from the offshore wind sale should help Eversource strengthen its balance sheet to support its transmission and distribution investments.