Eversource Energy's Top-Line On Track To Grow At An Above-Average Pace

Argus cut its price target on Eversource Energy (NYSE: ES) shares to $59 from $64 to reflect the decline in industrywide P/E multiples since the beginning of third quarter, as well as the brokerage’s expectations for a Fed rate hike in December.

“Utilities as a group are heavily debt-financed and aggregate interest charges are likely to rise in the event of a rate hike. In addition, in a rising interest rate environment, equity investors seeking income often move away from utility shares and turn to the bond market, as fixed-income rates begin to rise,” analyst Gary Hovis wrote in a note.

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That said, Hovis reiterated his Buy rating on Eversource, driven by the company’s strong fundamentals, clear earnings visibility, and generally favorable regulatory environment.

Hovis believes Eversource will outperform most other utilities in a rising rate environment given strong finances and solid management execution.

“We believe that the company is on track to deliver above-industry-average top-line growth over the long term, as investments in its transmission business provide opportunities to expand the rate base,” the analyst continued.

Eversource expects the transmission segment to generate 40-45 percent of profits by the end of 2016, and plans to invest approximately $1.8 billion in transmission projects over the next three years.

In addition to continued cost savings from the merger with NSTAR, the analyst expects the company’s gas distribution business to benefit from customer conversions to gas heating from oil heating.

The company projects 2016 EPS of $2.90-$3.05. Hovis sees 2016 EPS of $2.97 and 2017 estimate at $3.20.The company will report 3Q16 results on October 31.

At time of writing, shares of Eversource were up 0.94 percent to $52.47.