Investing.com -- Endesa SA (BME:ELE) shares rose after analysts at RBC Capital Markets, who flagged that the company’s guidance for 2024 appears "extremely conservative" in light of strong performance indicators in recent months.
At 7:40 am (1140 GMT), Endesa SA was trading 1.6% higher at €18.972..
RBC points to strong gains in hydro and solar power generation during the third quarter, which, combined with favorable gas market dynamics, could position the Spanish energy giant for a stronger-than-expected financial year.
In their preview of Endesa’s nine-month results for 2024, RBC analysts forecast an EBITDA of €3.815 billion, marking a 14% increase year-on-year, while EBIT is expected to reach €2.265 billion, up 19%.
Net income for the period is projected at €1.35 billion, representing a 27% rise from last year. These figures suggest Endesa is well on track to surpass its full-year guidance, particularly in light of favorable trends in energy generation and lower gas procurement costs.
A key factor driving these expectations is Endesa’s integrated electricity margin, which has benefited from a marked increase in low-cost hydro and solar power generation.
“We expect in 3Q24 high hydro output +68% y/y, solar +50% y/y and gains in wind and nuclear contributed to an increase of low marginal cost generation of c. 1.3TWh and lower CCGTs output of 1.1TWh,” the analysts said.
This shift to lower marginal cost generation helped offset reduced output from gas-fired plants, contributing to stronger margins overall.
RBC noted that Endesa could exceed its current electricity margin guidance of €54 per MWh for the full year.
Additionally, Endesa’s gas unit is expected to post higher-than-anticipated margins. RBC pointed out that the cost of gas procured under the company’s Algerian contract has been favorable, while a sharp rise in spot gas prices has further boosted profitability.
The MIBGAS spot prices in Q3 have climbed by approximately €10 per MWh since July, and RBC says that this development will allow Endesa to surpass its guidance for a gas unit margin of over €2 per MWh.
The distribution segment in Spain has also shown continued improvement, with cost savings contributing to stronger performance.
RBC analysts suggest these operational efficiencies, alongside the favorable trends in power generation and gas procurement, will help Endesa deliver results above the upper end of its full-year EBITDA guidance of €4.9 billion to €5.2 billion, and its net income target of €1.6 billion to €1.7 billion.
Endesa is set to release its full nine-month results on October 30, and RBC anticipates that the strong third quarter results will likely have a positive impact on the fourth quarter as well, particularly given the current levels of hydro reservoirs and improving supply margins.