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Morningstar | Enel Releases 2018 Final Results in Line With Expectations, Confirms 2019 Targets

Enel published its final 2018 results and confirmed its 2019 targets. We plan to raise our earnings forecasts and EUR 5.70 per share fair value estimate slightly on the strong results and outlook. We are reaffirming our no-moat and stable trend ratings. Enel confirmed a 2018 dividend at EUR 0.28 per share, up by 18% and implying a dividend yield of 5% as of mid-March.

Ordinary EBITDA of EUR 16.2 billion, up by 4% and in line with our estimates, had already been disclosed at preliminary results in early February. Still, the group unveiled more details regarding the drivers. On the positive side, growth in renewables and networks added EUR 1 billion of EBITDA. Also, cost savings added EUR 0.3 billion of EBITDA. We expect these growth engines to prevail in the short and medium term.

On the negative side, foreign exchange shaved 3% off EBITDA. Lower thermal margins in Iberia and Italy and lower renewables incentives in the U.S. had a negative impact of EUR 0.27 billion on the EBITDA.

Ordinary net income, which was not disclosed at preliminary results, was EUR 4.1 billion, up by 9%, in line with our and consensus estimates. On top of EBITDA growth, the bottom line was boosted by a EUR 0.4 billion reduction in financial expenses due to refinancing at lower rates and much lower other financial expenses. Furthermore, Enel's tax rate fell by 1% chiefly due to tax assets recognition on a tax reform in Colombia.

Enel reiterated its 2019 EBITDA target at EUR 17.4 billion and net income target at EUR 4.8 billion, both roughly in line with our estimates. We expect the positive drivers in 2018 to persist in 2019 while foreign exchange impact should be more favorable. Altogether, we plan to tweak upward our estimates for 2019 and beyond.