EVERSOURCE ENERGY (ES) Q2 2024 Earnings Summary
Executive Summary
- Q2 2024 GAAP EPS was $0.95, up sharply from $0.04 in Q2 2023, driven by stronger transmission and gas earnings and the absence of the prior-year offshore wind impairment; operating revenue declined 3.6% YoY to $2.53B as purchased power costs fell materially .
- Segment mix favored transmission ($189.0M) and gas ($27.1M); electric distribution softened on higher non-tracked O&M (storms) and the absence of a prior-year NH regulatory benefit .
- Management reaffirmed 2024 recurring EPS guidance of $4.50–$4.67 and long-term 5–7% EPS growth from a 2023 base, underscoring confidence in regulated growth and the offshore wind exit strategy .
- Strategic catalysts: closing Sunrise Wind sale to Ørsted in July and expected sale of Revolution and South Fork to GIP later in Q3; proceeds earmarked to reduce debt and improve FFO-to-debt metrics .
- Stock reaction catalysts: reaffirmed guidance, visible transmission/distribution investment runway, and balance sheet strengthening via wind asset sales and rate actions (e.g., NH interim rates) .
What Went Well and What Went Wrong
What Went Well
- Transmission earnings rose to $189.0M (+$28.0M YoY) on rate base growth and annual rate reconciliation, contributing $0.54 EPS for the quarter .
- Gas distribution earnings improved to $27.1M (+$15.4M YoY), aided by higher revenues from capital recovery mechanisms and NSTAR Gas base rate increases, with lower non-tracked O&M offsetting higher depreciation/interest .
- Offshore wind exit progressing: closed Sunrise Wind sale (gross proceeds $230M, staged) with no ongoing obligations; remaining wind assets anticipated to close in Q3, enabling debt paydown and balance sheet improvement .
- CEO: “Closing these deals delivers on our commitment to exit the offshore wind business and focus our resources on being a pure-play regulated utility…” .
What Went Wrong
- Electric distribution earnings fell to $149.7M (−$15.8M YoY), pressured by higher storm restoration costs (+$16.2M pre-tax), absence of last year’s NH regulatory benefit, and higher interest, depreciation, and property taxes .
- Parent and other companies swung to a loss of $(38.5)M (vs $5.1M), primarily on higher interest expense, highlighting funding costs and timing before wind proceeds and equity inflows fully offset .
- Interest expense increased materially to $271.3M (vs $207.3M), compressing consolidated results despite stronger operating income; management flagged higher rates/volume as headwinds .
Financial Results
Consolidated Performance vs Prior Year and Prior Quarter
Notes: Q2 2023 GAAP EPS included a $0.95/share impairment related to offshore wind; excluding charges, non-GAAP EPS was $1.00 .
Segment Earnings (Three Months Ended)
Operating KPIs (Three Months Ended)
Estimates vs Actuals
- S&P Global consensus estimates for Q2 2024 EPS and revenue were unavailable due to a data limit error; therefore, estimate comparisons could not be provided. Values would have been retrieved from S&P Global; unavailable in this instance.
Guidance Changes
Earnings Call Themes & Trends
Management Commentary
- CEO on strategic focus: “Closing these deals delivers on our commitment to exit the offshore wind business and focus our resources on being a pure-play regulated utility…” .
- CFO on segment drivers: “Transmission…earned $0.54 per share…increased due to rate base growth. Electric distribution earnings were $0.42…due primarily to higher O&M…partially offset by higher revenues…” .
- CEO on CT: “We are grateful for Governor Lamont's leadership…we're taking a wait-and-see approach…we need regulatory certainty…especially around AMI” .
Q&A Highlights
- Connecticut outlook and AMI: Management emphasized need for clear cost recovery and regulatory certainty before committing capital; CT commission composition changing, constructive but “wait-and-see” .
- Offshore wind sales timing/costs: Sunrise closed July 9; Revolution/South Fork expected Q3; construction progressing well; contingency exposure acknowledged and monitored; 50/50 cost-sharing past cap with Ørsted confirmed .
- FFO-to-debt bridge: Enhancements include RAM under-recoveries collection, wind sale proceeds, rate increases (EGMA, PSNH), and tax refunds (~$120M) to bolster cash flows; target remains 14–15% by 2025 .
- Equity plan: Up to $1.3B over several years; ~$250M YTD via ATM and treasury in H1; cadence dependent on closing items and regulatory outcomes .
Estimates Context
- S&P Global consensus EPS and revenue estimates for Q2 2024 were not retrievable due to an S&P data limit error at the time of analysis; as a result, estimate comparisons and beat/miss determinations are unavailable for this quarter. Values would have been retrieved from S&P Global; unavailable in this instance.
Key Takeaways for Investors
- Regulated growth intact: Transmission and gas segments are delivering, with distribution poised to improve in H2 on capital cost recovery and NH interim rates, supporting reaffirmed 2024 guidance .
- Balance sheet de-risking: Wind asset divestitures (Sunrise completed; Revolution/South Fork pending) and rate recoveries should lift FFO-to-debt toward 14–15% by 2025, lowering financing risk .
- Near-term EPS trajectory: Q2 EPS of $0.95 reflects higher interest costs; sequential margins remain healthy; watch for H2 distribution uplift and financing tailwinds as proceeds arrive .
- CT remains variable: Engagement continues, but investment pace tied to cost recovery; MA and NH offer clearer runway for capital deployment (ESMP approvals, PBR mechanisms) .
- Storm/O&M sensitivity: Elevated storm costs weighed on distribution; ongoing resiliency investments and trackers are important to stabilize earnings and cash flows .
- Capital plan visibility: Nearly $6B in transmission over five years and incremental distribution investments (e.g., substations, clean energy interconnections) support 5–7% LT EPS growth .
- Trading implications: Confidence around guidance and visible de-leveraging via asset sales provide support; regulatory headlines (CT) and interest rate path remain key swing factors .