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Morningstar | Enel Americas Reports Strong Earnings; Eletropaulo and Currency Weakness to Pressure Full Year. See Updated Analyst Note from 30 Jul 2018

We are reaffirming our fair value estimate of $10 per ADR after Enel Americas reported strong first-half 2018 earnings of $0.35 per ADR versus $0.18 per ADR in the year-ago period. The strong results were especially positive considering currency devaluations versus the U.S. dollar in Argentina and Brazil that negatively impacted EBITDA by $134 million.

We have lowered our 2018 and 2019 EPS estimates to $0.67 and $0.63, respectively, versus our previous estimates of $0.75 and $0.78, to reflect the dilution from the consolidation of Eletropaulo beginning June 1. Following the successful tender offer, Enel Americas is currently in control of approximately 93% of the company. The dilutive impact of the Eletropaulo acquisition did not have a material impact on our fair value estimate.

First-half EBITDA was $1,652 million, 19% higher than the same period last year, and compares to our full year estimate of $3.5 billion. Thus, first-half results appear to be on track to achieve our EBITDA estimate even with the dilutive acquisition and currency weakness in Argentina and Brazil.

South American economies continue to show strength, and annual GDP growth is expected to be solid in 2018 in Enel Americas’ service territories. GDP in Colombia and Brazil, home to two thirds of Enel Americas' EBITDA, is expected to increase 2.6% and 1.7%, respectively, in 2018, based on the July 2018 Latin American consensus forecast. Peru’s economy, estimated to contribute almost 20% of Enel Americas' 2018 EBITDA, is growing at an impressive 3.6% rate. Even Argentina, with currency devaluation of 37% year over year is expected to see 0.3% growth.