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On Monday, Eversource Energy (NYSE:ES) experienced a revision in its stock outlook by BMO Capital Markets, with the firm reducing the price target from $73.00 to $70.00. The analyst maintained a Market Perform rating on the stock. This adjustment comes in the wake of Orsted (CSE:ORSTED)'s recent announcement regarding financial impairments and project delays.
Orsted, a partner in the Revolution Wind offshore wind project, has reported taking a 3.9 billion kroner (approximately $580 million) impairment charge. The charge is partly due to the cancellation of a green hydrogen plant in Sweden and also includes delays in the Revolution Wind project. The completion date for this project, originally set for 2025, has now been postponed to 2026.
The delay is attributed to additional work required at the project’s onshore substation, which is currently under construction by Eversource. As a result of the postponement, there is an anticipated delay in revenue recognition for Eversource. Orsted has estimated this delay to be around $300 million, which is expected to affect Eversource's financials, as the revenue will now be recognized in 2026 instead of the previously planned 2025.
Eversource's involvement in the construction of the onshore substation is a critical component of the Revolution Wind project. The delay in the project's completion date and subsequent revenue recognition is a direct result of the additional work needed at the substation, as noted by Orsted in their announcement.
The adjustment of the price target by BMO Capital Markets reflects the anticipated impact of these developments on Eversource Energy's financial performance. The firm has taken into account the delayed revenue recognition and its potential effect on Eversource's near-term financial outlook.
In other recent news, Eversource Energy has reported significant earnings and revenue results. The company matched analysts' expectations with earnings per share (EPS) of $0.95 in the second quarter. BMO Capital has subsequently raised Eversource's stock price target from $69.00 to $73.00, maintaining a Market Perform rating.
Recent developments include positive political and regulatory changes in Connecticut, such as the appointment of a new Commissioner and legislation allowing the Connecticut CO-OP to bid on Aquarion, a water service provider. Eversource Energy is also making strides in its credit improvement program.
The company continues to demonstrate its commitment to regulated utility growth. Major investments are being made into transmission and distribution infrastructure, with $6 billion earmarked for transmission over the next five years. The sale of the Sunrise Wind Project has been successfully completed, and additional wind project sales are anticipated in the next quarter.
Eversource Energy has also made advancements in the Massachusetts AMI program, set to begin smart meter installations next year. Despite challenges in the Water Distribution segment and uncertainties in equity needs, the company's management remains confident in achieving its EPS growth rate through 2028.
InvestingPro Insights
Following the recent update on Eversource Energy's (NYSE:ES) stock outlook, it is essential to consider some key financial metrics and expert insights that could further inform investor decisions. With a market capitalization of $23.27 billion, Eversource Energy operates with a significant debt burden, which is an important factor for investors to monitor. Despite the current negative P/E ratio of -249.35, analysts are optimistic, predicting net income growth this year, which is reflected in an adjusted forward P/E ratio of 16.73 for the last twelve months as of Q2 2024.
Investors might also find the company's long-standing commitment to dividend payments noteworthy, as Eversource has raised its dividend for 25 consecutive years and maintained payments for 26 years. This is coupled with a dividend yield of 4.39% as of the end of 2024, which may appeal to income-focused investors. However, it is crucial to note that the company's short-term obligations currently exceed its liquid assets, which could pose liquidity risks.
For those seeking additional insights and detailed analysis, there are numerous other InvestingPro Tips available on the InvestingPro platform, which delve deeper into the financial health and future prospects of Eversource Energy.
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