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Mizuho made a bullish move on Eversource Energy (NYSE: NYSE:ES), increasing the stock's price target to $73 from the previous $62 while maintaining an Outperform rating.
The adjustment follows the recent completion of Eversource's sale of South Fork Wind and Revolution Wind projects to Global Infrastructure Partners (GIP).
The adjusted gross proceeds from these transactions are now reported at $745 million, a decrease from the initially announced $1.12 billion.
The reduction of $375 million in expected proceeds is attributed to $150 million in lower capital expenditures between the announcement of the transaction and its closing, coupled with $225 million related to the final terms of the sale with GIP. Eversource is anticipated to face a negative cash flow impact of $225 million in 2024 and an additional $360 million in 2026 due to these changes.
Despite these cash flow impacts, Eversource's shares are currently trading at an 18% price-to-earnings (P/E) discount compared to its industry peers. Mizuho's analysis suggests that the stock has the potential to close this gap and trade at a low double-digit P/E discount.
In other recent news, Eversource Energy has finalized the sale of 50 percent stakes in two offshore wind projects to Global Infrastructure Partners, generating $745 million in adjusted gross proceeds.
The latest development is part of Eversource's strategic shift towards regulated utility operations. The company is also anticipating a net loss of approximately $520 million from its offshore wind divestiture in the third quarter of 2024, which includes the sale of its interest in the Sunrise Wind project.
Eversource Energy's stock price target has been adjusted by BMO Capital Markets from $73.00 to $70.00 due to anticipated project delays and financial impairments. The company has also reported matching analysts' earnings per share (EPS) expectations at $0.95 for the second quarter. Furthermore, Eversource is making significant investments in transmission and distribution infrastructure, highlighting its commitment to regulated utility growth.
Despite the challenges in the Water Distribution segment and uncertainties in equity needs, Eversource's management remains confident in achieving its EPS growth rate through 2028. The successful sale of wind projects and the anticipated regulatory decisions mark important milestones for the company's future endeavors.
InvestingPro Insights
Eversource Energy's recent strategic moves and Mizuho's bullish outlook are complemented by several key insights from InvestingPro. The company's P/E ratio (adjusted) for the last twelve months as of Q2 2024 stands at 17.4, which aligns with Mizuho's observation of an 18% discount compared to industry peers. This valuation metric supports the potential for share price appreciation as suggested in the analysis.
An InvestingPro Tip highlights that Eversource has raised its dividend for 25 consecutive years, demonstrating a strong commitment to shareholder returns. This is further supported by the current dividend yield of 4.22% and a dividend growth rate of 5.93% over the last twelve months. These factors may attract income-focused investors, potentially contributing to the stock's performance.
Another relevant InvestingPro Tip indicates that net income is expected to grow this year, which could help address the cash flow impacts mentioned in the article. This positive outlook is reinforced by analysts' predictions that the company will be profitable this year, as noted in an additional tip.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide further insights into Eversource Energy's financial health and market position.
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