Eversource (ES) to Ride on Solid Investments & Acquisitions
Eversource Energy ES, involved in energy delivery, supplies electricity and natural gas to more than 3.7 million customers. Investments in renewable power operations, strengthening of infrastructure and strategic acquisitions will boost its performance.
We recently updated a research report on this Zacks #3 (Hold) stock, whose long-term prospects are impacted by shelving of the $1.6-billion Northern Pass transmission project.
Tailwinds
Eversource forecasts capital investment of $14.2 billion for the 2020-2024 time frame. Out of the total, the company has plans to invest nearly $10.1 billion in the 2020-2024 time period in its electric transmission and distribution network. The firm’s transmission reliability projects — namely Eastern MA Transmission projects, Greenwich Substation project, Hartford Area Transmission projects and Seacoast Reliability project — are progressing per plans. These regulated investments will help the company boost earnings per share by 5-7% over the 2020-2024 time frame from the 2019 level of $3.45.
Eversource diversified its operations and forayed into the water business through the acquisition of Aquarion Water Company in December 2017. The company entered into an agreement with NiSource Inc. NI to acquire Columbia Gas of Massachusetts for $1.1 billion. The transaction is expected to be completed in third-quarter 2020. This acquisition is expected to be accretive to Eversource shareholders in 2021, the first full year after closing.
Focus on renewable energy generation would help the company meet the renewable energy mandates by state governments, and enjoy the incentives offered by state and federal programs.
Headwinds
The $1.6-billion Northern Pass transmission project of Eversource was finally shelved after the New Hampshire Supreme Court upheld the state Site Evaluation Committee’s 2018 denial of the project. The company has no way of taking this 192-mile transmission project forward. This will definitely have an adverse effect on its growth plans.
Eversource outsources certain business functions to third-party suppliers and service providers. Substandard performance by these third parties could harm the business, reputation and results of operations.
Price Performance
In the past 12 months, shares of Eversource have returned 7.5% against the industry's 8.6% decline.
Stocks to Consider
A couple of better-ranked stocks in the same industry include Portland General Electric Company POR and Pampa Energia SA PAM, each currently having a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term (three to five years) earnings growth rate for Portland General Electric and Pampa Energia is currently projected at 5.1% and 6.5% respectively.
The Zacks Consensus Estimate for Portland General Electric and Pampa Energia’s 2020 earnings has moved 2.1% and 39.5% upward, respectively, in the past 60 days.
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NiSource, Inc (NI) : Free Stock Analysis Report
Portland General Electric Company (POR) : Free Stock Analysis Report
Pampa Energia S.A. (PAM) : Free Stock Analysis Report
Eversource Energy (ES) : Free Stock Analysis Report
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