Morningstar | Eversource Keeps its Steady Growth Machine On Track In 1Q
We are reaffirming our $56 fair value estimate and no-moat and stable moat trend ratings for Eversource Energy after it reported earning $0.97 per share in the first quarter of 2019, up from $0.85 per share in the first quarter of 2018. Eversource remains on track to meet our full-year earnings outlook.Management reaffirmed its 2019 earnings guidance range of $3.40-$3.50 and 5%-7% annual earnings growth target through 2023. Both of these are in line with our forecasts. We expect dividend growth to follow earnings growth.
Natural gas distribution earnings were the largest growth driver in the quarter with a boost from higher rates at Yankee Gas, as we expected. Electric distribution and electric transmission each grew more than 10% compared with the first quarter of 2018, but some of that was due to weather-related costs that weighed on 2018 results. We continue to expect Eversource to grow earnings 6% on average during the next five years.
Higher customer rates should continue to support 2019 earnings growth. Eversource recently requested its first base rate increase in New Hampshire in 10 years, asking for a $70 million increase. If approved, $33 million would go into effect in July 2019 and the rest in July 2020. We assume regulators grant a $60 million rate increase. If Eversource receives its full rate increase request, it would add $0.50 per share to our fair value estimate.
Our multiyear growth outlook continues to depend on Eversource investing $11 billion in 2019-22. This is slightly ahead of management's budget primarily because we think the company can find incremental investment opportunities in the Northeast. Its offshore wind development agreement with Orsted announced earlier this year could be one source of investment, but that could be several years out.
Eversource Energy is a public utility holding company. Through its subsidiaries, the company has four segments: electric distribution, which is engaged in the distribution of electricity to retail customers in Connecticut, Massachusetts and New Hampshire; electric transmission, which owns and maintains transmission facilities that are part of an interstate power transmission grid over which electricity is transmitted throughout New England; natural gas distribution, which distributes natural gas to communities in Massachusetts and cities and towns in Connecticut; and water distribution, which provides water services in towns and cities in Connecticut, Massachusetts and New Hampshire.
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