On Tuesday, BofA Securities adjusted its stance on Eversource Energy (NYSE:ES), shifting from an Underperform rating to a Neutral position. The firm also established a new price target for the utility company's shares at $61.00. The change in rating reflects an assessment that the previous concerns impacting the stock's performance are now accounted for in its current discounted valuation.
Eversource Energy's stock has faced challenges due to a combination of factors, including a weak balance sheet and projected earnings per share (EPS) growth at the lower end of the company's guidance. Additionally, Eversource has been tasked with improving regulatory outcomes in Connecticut.
The firm's free funds to debt (FFO/debt) ratio is currently estimated to be between 10-13%. However, potential strategic moves, such as the divestiture of Aquarion Water, the reversal of a charge on Sunrise Wind, and the possibility of additional equity issuances, could help Eversource achieve its FFO/debt goal of 14-15% by 2025.
BofA Securities analysts forecast a below-average EPS growth rate for Eversource of 5.1% extending through 2028. This projection takes into account an expected decline in base earnings from the Connecticut Light & Power (CL&P) segment. Furthermore, there are ongoing concerns regarding Eversource's strained relationship with the Public Utilities Regulatory Authority (PURA), which has tempered the firm's outlook on the stock's future performance.
The updated assessment from BofA Securities indicates that while there are still issues to be addressed, particularly in Connecticut, the negative factors have been sufficiently factored into the valuation of Eversource Energy's shares. The new price target of $61.00 suggests a level of cautious optimism for the stock's trajectory moving forward.
In other recent news, Eversource Energy has been the subject of several updates by financial analysts and its own management. Goldman Sachs (NYSE:GS) has raised its price target for Eversource Energy to $74, citing growth prospects and an improved balance sheet. This positive outlook is based on the company's first-quarter earnings for 2024 and its operations within favorable regulatory jurisdictions, including the Federal Energy Regulatory Commission transmission and Massachusetts.
On the other hand, BMO Capital Markets has adjusted its price target on Eversource Energy to $66, following the company's Q1 2024 earnings per share report that met expectations. The company's management has also confirmed their EPS guidance for 2024, projecting a range between $4.50 and $4.67.
In addition to these financial updates, Eversource Energy's recent earnings call revealed progress in its clean energy initiatives and wind projects. The company is advancing despite regulatory challenges, particularly in Connecticut, and is on track with its five-year capital expenditure forecast of $23.1 billion. Furthermore, Eversource Energy is exploring the potential sale of its water business and has raised $75 million through its ATM program.
InvestingPro Insights
Following BofA Securities' updated stance on Eversource Energy (NYSE:ES), the latest data from InvestingPro provides a clearer picture of the company's financial health and market position. With a current Market Cap of $20.43 billion and a Dividend Yield of 4.93%, Eversource demonstrates its commitment to returning value to shareholders, having raised its dividend for 25 consecutive years. Despite recent concerns over its balance sheet and earnings growth, Eversource is expected to turn profitable this year, as indicated by analysts.
InvestingPro Tips highlight the company's significant debt burden and the fact that its short-term obligations exceed its liquid assets, which aligns with BofA's commentary on the firm's weak balance sheet. However, the company's dedication to maintaining dividend payments, now for 26 consecutive years, suggests a stable financial policy that investors might appreciate. For those considering a deeper dive into Eversource Energy's financials, InvestingPro offers additional tips, providing a comprehensive analysis of the company's potential.
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