Morningstar | Weak Second Quarter Offsets Strong First Quarter for Emera; Lowers Dividend Target
We are reaffirming our CAD 46 per share fair value estimate, along with our narrow economic moat and stable moat trend ratings after Emera reported second-quarter operating earnings of $0.48 per share, versus $0.55 in the same year-ago period.We plan to lower our full-year earnings estimate, but our 7% earnings growth expectations through 2022 remain unchanged. After a strong first quarter, year-to-date results are in line with our expectations. Management does not issue earnings guidance.
Investors should be disappointed that Emera lowered its previous dividend growth target to 4%-5% from 8% through 2022. This new growth rate is more in line with the industry average. Management noted the reduction will free up capital for its growth projects. We previously projected 6% dividend growth, viewing the 8% as unattainable. Dividend policy has no effect on our fair value estimate.
Key growth investments remain on track, particularly at the company's TECO subsidiary. TECO is progressing on its plans to install 600 MW of solar in Florida. To date, Emera has spent $400 million of the total $850 million forecast, with the first 145 MW coming online later this year and the remaining 250 MW schedule for early 2019. Favorable regulatory treatment allows for immediate recovery of investments upon start of operation. The Florida utility also recently announced an $850 million investment plan to modernize the Big Bend Power Station.
Unfavorable weather at Emera's Florida and New Mexico utilities along with a stronger Canadian dollar that lowered U.S. earnings hurt second-quarter consolidated earnings. Earnings at Emera Energy, the company's unregulated merchant unit, increased due to higher New England capacity market revenue and the absence of an unplanned outage in 2017.
Emera is an energy and services company which invests in electricity generation, transmission and distribution, gas transmission and utility energy services. Co. had six segments: Nova Scotia Power Inc., an electric utility and electricity supplier in Nova Scotia; Emera Maine, which provides electric transmission and distribution services in the U.S.; Emera Caribbean, which includes Emera (Caribbean) Incorporated and its subidiaries; Pipelines, which includes Emera Brunswick Pipeline Company Ltd. and an equity investment in Maritimes & Northeast Pipeline; Emera Energy, which includes Emera Energy Services that provides energy management services; and Corporate and Other.
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Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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