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Eversource (ES) Up 2.3% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
Alcoa (AA) delivered earnings and revenue surprises of 97.06% and -2.92%, respectively, for the quarter ended June 2019. Do the numbers hold clues to what lies ahead for the stock?

It has been about a month since the last earnings report for Eversource Energy (ES). Shares have added about 2.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Eversource due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Eversource Energy Q1 Earnings & Revenues Beat Estimates

Eversource Energy reported first-quarter 2019 operating earnings of 97 cents per share, beating the Zacks Consensus Estimate of 91 cents by 6.6%. The reported figure also improved 14.1% from the year-ago figure of 85 cents.

Total Revenues

First-quarter revenues of $2,415.8 million topped the Zacks Consensus Estimate of $2,339 million by 3.3% and increased from the year-ago figure of $2,287.9 million by 5.6%.

Highlights of the Release

Operating expenses increased 4.1% year over year to $1,921.1 million, primarily owing to higher expenses from purchased power, fuel and transmission, plus operation and maintenance costs.

Operating income was up 11.8% from the prior-year quarter to $494.7 million. Interest expenses increased 8.8% year over year to $131.7 million in the quarter.

Net income in the quarter under review was $308.7 million, up 14.5% from the year-ago level.

Segmental Performance

Electric Distribution:
Earnings from this segment were up 15.3% from the prior-year quarter to $120.1 million. The upside was primarily attributable to higher distribution revenues, partially offset by the absence of New Hampshire generation earnings.

Electric Transmission: Earnings of the segment improved 10.1% year over year to $118.2 million. The improvement was due to Eversource Energy’s additional investment in the electric transmission system.

Natural Gas Distribution: This segment’s earnings were $76.5 million, up 32.4% from $57.8 million in the year-ago quarter. The segment’s impressive first-quarter results were primarily due to the timing of distribution revenues under the recently approved decoupling mechanism for Eversource’s Connecticut natural gas business.

Water Distribution: Earnings from this segment were $0.9 million compared with $1.5 million in the year-ago quarter. The decline was primarily due to higher pension costs.

Eversource Parent & Other Companies: The segment’s net loss was $7 million compared with the year-ago loss of $1.4 million.

Guidance

Eversource Energy reiterated its 2019 earnings guidance in the range of $3.40-$3.50 per share. The midpoint of management’s 2019 EPS guidance is $3.45, which is in line with the current Zacks Consensus Estimate for the period.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Eversource has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Eversource has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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