Morningstar | Iberdrola Raises Its 2019 Guidance After a Good Set of 1H Results; Shares Rich
We reiterate our fair value estimate of EUR 7 per share along with our no-moat, stable trend ratings after the group delivered first-half results in line with consensus expectations and increased its 2019 net profit growth guidance. Shares appear overvalued.First-half EBITDA increased by 12.5% to EUR 4.99 billion, in line with consensus expectations. Reported net profit rose by 17% to EUR 1.64 billion. The fastest-growing division was generation and supply whose EBITDA jumped by 35% in the first half, and 56% growth in the second quarter. The division was boosted by good performance in Mexico on new CCGTs' production and in Spain from a production increase and a one-off from LNG contract sales, which contributed 10% to growth. Networks' EBITDA grew 9% in the first half, with 7% growth in the second quarter owing to solid growth in the U.S. on new rate plans and lower storm costs than 2018, and in Brazil on cost savings and an increase in demand. On the negative side, renewables' EBITDA decreased by 2% in the first half, and fell 7% in the second quarter. The key reasons were the drought in Spain and lower output in the U.S. because of poor wind conditions.
Iberdrola raises its 2019 net profit growth guidance from a high-single-digit to low-double-digits, after raising it from a low single-digit to a high single-digit during first-quarter results. Our 2019 net profit estimate of EUR 3.25 billion, roughly in line with consensus estimates, implies 8% growth. We should tweak it upwards on account of higher profitability in its generation and supply business in Spain, notably because of the LNG one-off. However, the effects on our long-term estimates and valuation will be limited. The group said it is likely to beat its 13 GW additional renewables capacity during 2018-2022. However, we see limited value creation from Iberdrola's renewables investments because of poor returns as we wrote in our ''Green is (Relatively) Good for European Utilities'' report on July 2.
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.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.