Reinitiating Coverage of Iberdrola; Shares are Slightly Overvalued
We are reinitiating coverage of Iberdrola while maintaining our fair value estimate per share of EUR 6.5. We keep the no-moat and stable moat trend ratings. We think the shares are slightly overvalued at the current share price.Current return on capital amounts to 5%, below the 7.2% average of diversified European utilities under our coverage. We expect this cost of capital to marginally improve to 5.6% in 2020, below the 6% targeted by the management. Return on capital is hampered by unsupport...
Iberdrola is a holding company. Through its subsidiaries, Co. operates in four segments: network business, which includes all the energy transmission and distribution activities, and other regulated activity originated in Spain, the U.K., the U.S. and Brazil; deregulated business, which includes electricity generation and sales businesses as well as gas trading and storage businesses carried on by Co. in Spain, Portugal, the U.K. and North America; renewable business, with activities related to renewable energies in Spain, the U.K., the U.S. and the rest of the world; and other businesses, including the engineering and construction businesses and the non-power businesses.
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