Eversource Gains as BofA Upgrades to 'Buy' on Regulatory Thaw
Bank of America raises its price target to $85, citing a constructive shift in Connecticut's utility oversight and a clearer path to earnings growth.
Shares of Eversource Energy (NYSE: ES) climbed in Tuesday trading after Bank of America upgraded the utility giant to 'Buy' from 'Neutral,' signaling renewed confidence in the company's financial outlook amid a significant overhaul of Connecticut's regulatory landscape.
The bank also boosted its price target on Eversource to $85 from $73, suggesting a potential 16% upside from its current trading levels. The stock responded positively, rising 0.35% to $73.105 in morning trading as investors reacted to the shifting sentiment.
The upgrade is anchored in what Bank of America analysts describe as an improving regulatory tone in Connecticut, a critical service area for Eversource. This follows a period of contentious relations between the state's utilities and its Public Utilities Regulatory Authority (PURA). Recent legislative changes and new appointments to the PURA board are now expected to provide a more stable and predictable environment for cost recovery and infrastructure investment.
"Connecticut's utility overhaul creates tailwinds for Eversource stock," noted a Bank of America analyst in a report published Tuesday. The firm's optimism is largely tied to the implementation of new legislation and a leadership refresh at PURA. Earlier this month, Connecticut Governor Ned Lamont appointed four new commissioners to the authority, a move widely seen as a for the state's utility sector.
This new framework is expected to give Eversource a clearer path to achieving consistent earnings growth and bolstering its balance sheet. Bank of America projects that the more constructive regulatory backdrop could support an approximate 6% growth in earnings per share (EPS) for Eversource through 2029.
For years, Eversource and other utilities in the state faced challenges related to storm cost recovery and capital expenditure approvals, which weighed on investor confidence and the company's stock performance. The shares have traded in a 52-week range of $51.06 to $74.46, reflecting the market's uncertainty.
The strategic repositioning for Eversource also includes moves to streamline its business. The company is advancing the sale of its Aquarion Water Company, a transaction intended to create a "cleaner balance sheet," according to regulatory filings. This, combined with de-risking its offshore wind ventures, allows the company to focus more intently on its core regulated transmission and distribution operations.
The improved outlook represents a significant turnaround for the Hartford and Boston-based utility, which serves approximately 4 million customers across three states. The company's ability to navigate the complex regulatory environment is paramount to its financial health and its capacity to fund critical infrastructure upgrades.
With a market capitalization of over $27 billion, Eversource is a major player in the U.S. utility sector. The company currently offers a dividend yield of approximately 4.04%. The upgrade from Bank of America aligns with a cautiously optimistic view from the broader analyst community, which now holds a consensus target price of around $72, with ratings split between buy and hold recommendations.
Investors will now be watching for execution on its strategic initiatives and tangible evidence that the new regulatory relationship in Connecticut will translate into sustained financial performance and shareholder returns.