Eversource Earnings: As Offshore Wind Deal Nears End, Focus Shifts to Core Business

We are reaffirming our $74 per share fair value estimate for Eversource ES after the company announced it earned $0.97 per share on an adjusted basis during the third quarter of 2023, down from $1.01 during the third quarter of 2022. We are reaffirming our no-moat rating for Eversource.

The drop in earnings during the quarter was primarily due to revenue timing. Year-to-date adjusted EPS is $3.38, up 7% from the first nine months of 2022 and on track to meet our full-year estimate. Management tightened its full-year EPS guidance range to $4.30-$4.43, in line with our estimate. Adjusted earnings exclude the $0.95 per share charge Eversource took during the second quarter related to the divestiture of its offshore wind investments.

Eversource’s stock has been one of the worst-performing utilities stocks this year, down 31%, or twice as much as the Morningstar US Utilities Index has fallen this year. Most of the market concern is Eversource’s offshore wind investment, which the company appears set to exit at a loss. Management suggested it was in the final stages of completing the sale of its interest in three in-development projects totaling about $2.5 billion before write-offs.

Even after incorporating the offshore wind loss, we think the stock is 25% undervalued. Eversource’s core utility business is performing well. Management reaffirmed its 5%-7% annual long-term growth rate and $17 billion capital investment plan in 2024-27, excluding offshore wind, both in line with our outlook. Proceeds from exiting offshore wind should ease financing needs until 2025.

We think Massachusetts offers the potential for additional growth investment in 2025 and beyond as long as regulation remains constructive. In Connecticut, Eversource will test what has been a challenging regulatory environment with its request to recover about $650 million of accrued storm costs. We don’t think regulators will approve the full amount.