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Why Is Eversource (ES) Up 0.5% Since Last Earnings Report?

Zacks Equity Research
In the latest trading session, The Trade Desk (TTD) closed at $198.74, marking a -0.03% move from the previous day.

A month has gone by since the last earnings report for Eversource Energy (ES). Shares have added about 0.5% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

Eversource Energy Misses on Q4 Earnings, Beats Revenues

Eversource Energy reported fourth-quarter 2018 operating earnings of 73 cents per share, lagging the Zacks Consensus Estimate of 75 cents. The reported figure also declined from the year-ago figure of 75 cents by 2.7%.

Total Revenues

Fourth-quarter revenues of $2,034.9 million topped the Zacks Consensus Estimate of $1,818 million by 11.9% and also increased from the year-ago figure of $1,895.5 million by 7.4%.

Highlights of the Release

In 2018, electric and natural gas distribution increased 2.2% and 4.9% year over year, respectively.

Operating expenses increased nearly 12.6% year over year to $1,634.9 million, primarily owing to higher expenses from purchased power, fuel and transmission, plus operation and maintenance costs.

Operating income was down 9.9% to $400.1 million, while interest expenses were up 23.3% year over year to $126.1 million.

Net income in the quarter under review was $231.3 million, down 2.6% from the year-ago level.

Segmental Performance

Electric Distribution:
Earnings from this segment were down 26.7% from the prior-year quarter to $76.2 million. The downside was primarily attributable to the divestiture of Eversource Energy’s New Hampshire fossil and hydro plants in 2018, along with higher depreciation, interest and property tax expenses, primarily in Connecticut.

Electric Transmission: The bottom line of the segment decreased 4.7% year over year to $97.5 million. The downside was primarily attributable to a reduction in the benefits from tax reform compared with the prior-year quarter.

Natural Gas Distribution: This segment’s earnings were $43 million compared with $25.5 million in the year-ago quarter. The segment’s impressive fourth-quarter results were primarily due to higher distribution margins and the impact of 2018 rate review at Yankee Gas Services Company.

Water Distribution: Eversource Energy’s water distribution segment, created after the company acquired Aquarion Water Company in December 2017, earned $4.5 million in fourth-quarter 2018.

Eversource Parent & Other Companies: The segment earned $10.1 million compared with the year-ago earnings of $6.8 million.

Guidance

Eversource Energy expects 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.

Long-term earnings growth of the company through 2023 is projected in the 5-7% band.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, Eversource has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

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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