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On Thursday, JPMorgan analysts downgraded Eversource Energy (NYSE:ES)'s stock rating from Neutral to Underweight, adjusting the price target to $58.00 from the previous $69.00. The stock, currently trading at $56.31 with a market capitalization of $20.65 billion, has seen significant pressure recently, with InvestingPro data showing a 9% decline in the past week. The downgrade comes amid concerns about the company's ongoing exposure to offshore wind (OSW) project costs, high customer bills in the Northeast, and challenging regulatory relationships, particularly in Connecticut.
The JPMorgan analysts highlighted several factors that contributed to the negative outlook on Eversource Energy. According to InvestingPro data, the company operates with a concerning debt-to-equity ratio of 1.94 and a current ratio of 0.76, indicating potential liquidity challenges. They pointed to the risk of cost overruns for the Revolution Wind (RevWind) project, for which Eversource Energy is financially responsible until its completion, expected in 2026. Additionally, the Bureau of Ocean Energy Management's (BOEM) compliance monitoring and the current administration's stance on OSW could pose further risks.
The confirmation vote for the Connecticut Public Utilities Regulatory Authority (PURA) chair in the House, with the Senate's decision pending, was also cited as a contributing factor to the downgrade. Analysts expressed concerns that increased recession odds could lead to heightened bill pressure and regulatory tensions in the Northeast, as observed in recent National Association of Regulatory Utility Commissioners (NARUC) meetings.
Eversource Energy's balance sheet, with approximately $2 billion in storm costs as of year-end 2024, is expected to add to the pressure on customer rates. Despite these challenges, the company maintains a significant 5.35% dividend yield and has raised its dividend for 26 consecutive years, according to InvestingPro, which offers 8 additional key insights about the company's financial health and growth prospects in its comprehensive Pro Research Report. The analysts noted that any downturn in the macroeconomic environment could disproportionately affect Eversource Energy, given the already strained bill levels in the region.
In other recent news, Eversource Energy reported fourth-quarter 2024 earnings per share (EPS) of $1.01, surpassing the consensus estimate of $0.99. Despite this positive earnings report, Scotiabank (TSX:BNS)'s analyst Andrew Weisel reduced the company's price target to $55, maintaining a Sector Underperform rating. Weisel cited concerns about Eversource's growth prospects and regulatory challenges in Connecticut, noting that the company's 2025 earnings guidance and capital expenditure updates were below expectations. Mizuho (NYSE:MFG) Securities, on the other hand, raised Eversource's price target to $68, retaining an Outperform rating, reflecting confidence in the company's regulatory stability.
Additionally, Eversource Energy has been added to the S&P 500 Dividend Aristocrats index, recognizing its history of raising dividends for at least 25 consecutive years. This inclusion highlights Eversource's commitment to returning value to shareholders, with a current dividend yield of 4.96%, which is notably higher than the index's average yield of 2.39%. The company is expected to engage extensively with Connecticut regulators in 2025, as regulatory conditions continue to play a significant role in its operations. The contrasting analyst views from Scotiabank and Mizuho underscore the mixed sentiment surrounding Eversource's future performance.
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