Eversource Energy (ES) Bundle
Understanding Eversource Energy (ES) Revenue Streams
Understanding Eversource Energy’s Revenue Streams
As of September 30, 2024, Eversource Energy reported the following operating revenues by segment:
| Segment | Operating Revenues (Millions of Dollars) |
|---|---|
| Electric Distribution | $6,860.8 |
| Natural Gas Distribution | $1,516.7 |
| Electric Transmission | $1,583.9 |
| Water Distribution | $174.7 |
| Other | $1,253.6 |
| Eliminations | ($2,460.4) |
| Total | $8,929.3 |
Year-over-Year Revenue Growth Rate
In the first nine months of 2024, Eversource Energy's total operating revenues amounted to $8,929.3 million, reflecting a decrease of $287.2 million compared to $9,216.5 million in the same period in 2023, resulting in a year-over-year growth rate of approximately (3.1%).
Contribution of Different Business Segments to Overall Revenue
The contribution of each business segment to the overall revenue for the first nine months of 2024 is as follows:
| Segment | Contribution to Revenue (Millions of Dollars) | Percentage of Total Revenue |
|---|---|---|
| Electric Distribution | $6,860.8 | 76.9% |
| Natural Gas Distribution | $1,516.7 | 17.0% |
| Electric Transmission | $1,583.9 | 17.7% |
| Water Distribution | $174.7 | 2.0% |
| Other | $1,253.6 | 14.0% |
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- Revenue from electric distribution decreased due to lower demand and regulatory adjustments.
- Natural gas distribution revenue increased by $39.2 million in the first nine months of 2024 compared to the same period in 2023, driven by higher revenues from capital tracking mechanisms and a base distribution rate increase.
- Water distribution segment revenues rose due to rate adjustments following a favorable ruling from the Connecticut Public Utilities Regulatory Authority (PURA).
- Overall, the decline in total revenues is primarily attributed to decreased wholesale market sales and transmission revenues, which fell by $1,237.7 million year-over-year.
A Deep Dive into Eversource Energy (ES) Profitability
Profitability Metrics
The profitability metrics of Eversource Energy provide a clear view of its financial health as of 2024. Below, we break down key profitability indicators including gross profit, operating profit, and net profit margins, along with trends over time and comparisons with industry averages.
Gross Profit, Operating Profit, and Net Profit Margins
For the first nine months of 2024, Eversource reported the following financial performance:
| Metric | 2024 (9 Months) | 2023 (9 Months) |
|---|---|---|
| Gross Profit | $2,060.9 million | $1,840.8 million |
| Operating Profit | $1,517.6 million | $1,840.8 million |
| Net Profit | $739.1 million | $846.2 million |
| Gross Profit Margin | 23.1% | 19.9% |
| Operating Profit Margin | 17.0% | 19.9% |
| Net Profit Margin | 8.3% | 9.2% |
Trends in Profitability Over Time
Over the past few years, Eversource has experienced fluctuations in profitability metrics:
- Gross Profit Margin increased from 19.9% in 2023 to 23.1% in 2024.
- Operating Profit Margin decreased from 19.9% in 2023 to 17.0% in 2024.
- Net Profit Margin declined from 9.2% in 2023 to 8.3% in 2024.
Comparison of Profitability Ratios with Industry Averages
As of 2024, Eversource's profitability ratios can be compared against industry averages:
| Metric | Eversource 2024 | Industry Average |
|---|---|---|
| Gross Profit Margin | 23.1% | 22.0% |
| Operating Profit Margin | 17.0% | 18.5% |
| Net Profit Margin | 8.3% | 9.0% |
Analysis of Operational Efficiency
Operational efficiency is crucial for maintaining profitability. The following insights highlight Eversource’s cost management and gross margin trends:
- In 2024, the company reported operating expenses of $5,680.3 million, up from $6,851.7 million in 2023.
- Depreciation and amortization increased to $1,188.1 million in 2024 from $524.0 million in 2023.
- Despite increased costs, Eversource has managed to maintain a relatively strong gross profit margin, indicating effective cost management strategies.
Overall, Eversource's profitability metrics reflect its ongoing efforts to optimize operations while navigating the complexities of the energy sector.
Debt vs. Equity: How Eversource Energy (ES) Finances Its Growth
Debt vs. Equity: How Eversource Energy Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, Eversource Energy reported total long-term debt of $27.41 billion, with a current portion of $139.8 million. The company also had $1.79 billion in available borrowing capacity under its commercial paper programs. Short-term borrowings were utilized to manage working capital needs, evidenced by intercompany loans of $135 million from Eversource parent to its subsidiary CL&P.
Debt-to-Equity Ratio
The debt-to-equity ratio as of September 30, 2024, stood at approximately 4.29, significantly higher than the industry average of around 1.5. This ratio indicates a substantial reliance on debt financing compared to equity, which is characteristic of utility companies that typically operate with heavy capital requirements.
Recent Debt Issuances
In the first nine months of 2024, Eversource issued $4.4 billion in new long-term debt while repaying $1.26 billion. Notable recent issuances include:
| Debt Type | Amount Issued (Millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| CL&P Series A First Mortgage Bonds | $350.0 | 4.65% | January 2029 |
| NSTAR Electric Debentures | $600.0 | 5.40% | June 2034 |
| Eversource Parent Series FF Senior Notes | $700.0 | 5.85% | April 2031 |
Credit Ratings
Eversource holds a credit rating of Baa1 from Moody's and BBB+ from S&P, reflecting a stable outlook despite the high debt levels. These ratings indicate a moderate credit risk and the ability to meet financial commitments.
Balancing Debt Financing and Equity Funding
To balance its capital structure, Eversource has actively utilized both debt and equity financing. In the first nine months of 2024, the company issued 13.3 million common shares, generating net proceeds of $830.2 million. These funds were primarily allocated for general corporate purposes, complementing the capital raised through debt.
Key Financial Metrics
| Metric | Value |
|---|---|
| Total Long-Term Debt | $27.41 billion |
| Short-Term Debt | $139.8 million |
| Debt-to-Equity Ratio | 4.29 |
| Available Borrowing Capacity | $1.79 billion |
| New Long-Term Debt Issued (2024) | $4.4 billion |
| Equity Issued (2024) | $830.2 million |
Assessing Eversource Energy (ES) Liquidity
Assessing Eversource Energy's Liquidity
Current Ratio: The current ratio as of September 30, 2024, is 1.27, calculated from current assets of $1.77 billion and current liabilities of $1.39 billion.
Quick Ratio: The quick ratio stands at 0.77, indicating the company's ability to meet short-term obligations with its most liquid assets.
Working Capital Trends
As of September 30, 2024, working capital is $383.45 million, reflecting a significant improvement from $24.59 million as of December 31, 2023. This increase highlights the company’s enhanced operational efficiency and cash flow management.
Cash Flow Statements Overview
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Cash Flow | $1,517.61 | $1,169.15 |
| Investing Cash Flow | ($3,323.46) | ($3,958.98) |
| Financing Cash Flow | $1,842.23 | $2,448.98 |
Cash flows provided by operating activities totaled $1.52 billion in the first nine months of 2024, compared to $1.17 billion in the same period of 2023. The increase was driven by improved regulatory recoveries and timing of cash payments.
Potential Liquidity Concerns or Strengths
Cash and cash equivalents totaled $97.9 million as of September 30, 2024, up from $53.9 million as of December 31, 2023. Additionally, available borrowing capacity under commercial paper programs reached $1.79 billion as of September 30, 2024.
In the first nine months of 2024, the company issued $4.40 billion in new long-term debt while repaying $1.26 billion of long-term debt, showcasing a proactive approach to managing its capital structure.
Overall, the liquidity position appears robust, supported by a healthy operating cash flow and significant available credit lines, mitigating potential liquidity concerns moving forward.
Is Eversource Energy (ES) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, we will explore key valuation metrics including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios. Additionally, we will review stock price trends, dividend yield and payout ratios, and analyst consensus.
Valuation Ratios
The following table summarizes the key valuation ratios as of the end of September 2024:
| Metric | Value |
|---|---|
| Price-to-Earnings (P/E) Ratio | 17.5 |
| Price-to-Book (P/B) Ratio | 1.85 |
| Enterprise Value-to-EBITDA (EV/EBITDA) | 10.8 |
Stock Price Trends
Over the past 12 months, the stock price has exhibited the following trends:
| Date | Stock Price (USD) |
|---|---|
| September 2023 | 77.50 |
| December 2023 | 80.00 |
| March 2024 | 85.00 |
| June 2024 | 83.00 |
| September 2024 | 75.00 |
Dividend Yield and Payout Ratios
The company has demonstrated a consistent commitment to returning value to shareholders through dividends:
| Metric | Value |
|---|---|
| Dividend Yield | 3.6% |
| Dividend Payout Ratio | 65% |
Analyst Consensus
Analysts have provided the following consensus ratings:
| Rating | Number of Analysts |
|---|---|
| Buy | 5 |
| Hold | 10 |
| Sell | 2 |
As of September 30, 2024, the consensus indicates a moderate outlook, with a majority recommending to hold the stock while a significant number suggest buying, reflecting confidence in its long-term value despite recent performance fluctuations.
Key Risks Facing Eversource Energy (ES)
Key Risks Facing Eversource Energy
Overview of Internal and External Risks
The utility sector is characterized by significant internal and external risks. Eversource Energy faces competitive pressures from other utility providers, which may impact market share and pricing strategies. Regulatory changes also pose a risk, particularly as governments push for renewable energy initiatives and impose stricter environmental standards. Market conditions, including fluctuations in energy prices and demand volatility, further complicate the operational landscape.
Operational, Financial, or Strategic Risks
Recent earnings reports highlight several key risks:
- In the third quarter of 2024, Eversource reported a $118.1 million loss, compared to a profit of $339.7 million in the same quarter of 2023.
- For the first nine months of 2024, net income was $739.1 million, down from $846.2 million in the first nine months of 2023.
- The company incurred an after-tax loss of $524 million in 2024 from the sale of offshore wind investments.
- Operating revenues for the nine months ended September 30, 2024, totaled $8.93 billion, reflecting the impact of regulatory tracking mechanisms and fluctuating energy costs.
Mitigation Strategies
Eversource has implemented several strategies to mitigate these risks:
- Increased capital investments from $23.1 billion to $23.7 billion for 2024-2028 to enhance infrastructure resilience.
- The company has a robust liquidity position, with cash flows from operating activities amounting to $1.52 billion in the first nine months of 2024.
- As of September 30, 2024, cash and cash equivalents stood at $97.9 million, up from $53.9 million at the end of 2023.
| Risk Type | Description | Impact | Mitigation Strategy |
|---|---|---|---|
| Operational | Losses from offshore wind investments | $524 million loss in Q3 2024 | Strategic divestitures and capital investments |
| Financial | Decrease in net income | Net income down to $739.1 million | Cost management and operational efficiency |
| Regulatory | Changes in energy regulations | Increased compliance costs | Proactive engagement with regulators |
| Market | Fluctuations in energy prices | Impact on revenue and profitability | Diversification of energy sources |
Overall, Eversource continues to navigate a complex risk landscape while focusing on strategic investments and regulatory compliance to maintain its financial health.
Future Growth Prospects for Eversource Energy (ES)
Future Growth Prospects for Eversource Energy
Analysis of Key Growth Drivers
The company is focused on enhancing its capital investments, projected to reach $23.7 billion from 2024 to 2028, an increase from the previously estimated $23.1 billion. Key areas for growth include:
- Product Innovations: Investments in renewable energy sources, particularly offshore wind projects, are expected to bolster revenue streams.
- Market Expansions: The Electric Sector Modernization Plan (ESMP) in Massachusetts is a critical initiative to enhance service quality and operational efficiency.
- Acquisitions: The potential sale of the Aquarion water distribution business is under consideration, which may provide strategic capital for reinvestment.
Future Revenue Growth Projections and Earnings Estimates
For 2024, the company projects non-GAAP earnings in the range of $4.52 to $4.60 per share. Long-term EPS growth is anticipated to be between 5% and 7% through 2028.
| Year | Projected EPS ($) | Growth Rate (%) | Capital Investments ($ Billion) |
|---|---|---|---|
| 2024 | 4.56 | 5-7 | 23.7 |
| 2025 | 4.79 | 5-7 | 23.7 |
| 2026 | 5.03 | 5-7 | 23.7 |
| 2027 | 5.28 | 5-7 | 23.7 |
| 2028 | 5.54 | 5-7 | 23.7 |
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic initiatives include:
- Partnerships: Collaborations with Ørsted for offshore wind projects are key to expanding renewable energy capacity.
- Modernization Plans: The implementation of the ESMP is designed to enhance infrastructure reliability and customer service.
- Investment in Technology: Continued investment in smart grid technologies will improve operational efficiencies and customer experience.
Competitive Advantages That Position the Company for Growth
The company maintains several competitive advantages:
- Strong Regulatory Framework: The utility operates under a well-defined regulatory environment, which offers stability and predictability.
- Diverse Service Portfolio: The company's operations span electric, natural gas, and water distribution, providing a balanced revenue stream.
- Established Infrastructure: A significant investment in infrastructure supports reliability and customer satisfaction, enhancing growth potential.
Overall, the company's focus on modernization, strategic partnerships, and a diverse service portfolio positions it well for future growth.
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Resources:
- Eversource Energy (ES) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Eversource Energy (ES)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Eversource Energy (ES)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.