Morningstar | Successful Regulatory Outcomes Power Eversource's Growth
We are reaffirming our $53 fair value estimate and no-moat and stable moat trend ratings for Eversource Energy after it reported earning $0.91 per share in the third quarter, up 11% from $0.82 in the third quarter of 2017. Earnings remain on track to meet our full-year expectations. Management reaffirmed its full-year earnings guidance of $3.20-$3.30 per share and its 5%-7% long-term growth rate, both in line with our estimates.All of Eversource's business segments are growing at a steady rate, and we expect this will continue through 2019 based on positive regulatory developments. Electric transmission remains the highest-growth segment with year-to-date earnings up $0.13 per share, or 14%, year over year. Positive regulatory developments at the Federal Energy Regulatory Commission this year should continue to support that segment's growth.
Eversource management also raised its 2019-21 capital spending budget to $7.1 billion from $6.5 billion, a move we already anticipated. We think this is a positive development for shareholders as it replaces some of the lost growth investment with the failure of the Access Northeast and Northern Pass projects. We think there could be more upside in the electric and natural gas distribution segments following constructive regulatory outcomes.
Aquarion Water has added $0.08 per share year to date since its December 2007 acquisition. We expect Aquarion earnings to grow next year with investment and acquisitions, but it could be difficult to match the one-time benefit realized this year. Eversource’s other segments will have to pick up for the new Aquarian earnings next year to maintain a 5%-7% growth rate.
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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