Eversource Energy (ES)
Utilities — servicios eléctricos y de gas natural regulados
Eversource is a regulated electric and natural gas distribution and transmission monopoly in New England, with a guaranteed return on a rate base growing ~$5-6bn/year via capex. After selling Aquarion Water and absorbing FERC's ROE cut, 2026 guidance ($4.57-$4.72 EPS) anchors 5-7% annual EPS growth through 2030. The verdict is Undervalued: at the current price, the implied total return (appreciation + dividend) is +11% annual against the 15% required, with a dividend yield of 4.4% that accounts for most of the return of a utility with this profile.
- Price
- $71.28
- Intrinsic value (5y, base)
- $96
- Total annual return (5y)
- 10.8%
- Status (nominal)
- Undervalued
- Margin of safety
- +24%
The essentials
- Regulated distribution/transmission monopoly with no generation exposure: it earns only on the delivery margin, with a return guaranteed by the regulator on the rate base.
- The sale of Aquarion Water (closed Jun 30, 2026) leaves Eversource as a pure regulated electric and gas company; FERC's transmission ROE cut (10.57%→9.57%, Mar 2026) is already built into guidance.
- A $26,510 million capex plan between 2026 and 2030 funded with operating cash, debt, and share issuances via an ATM program (no buybacks): the rate base grows, but so does the share count.
Intrinsic value — two valuation methods
Total return at 5 years: 10.7%/year = 6.1% appreciation + 4.7% dividend. The target price ($96) is ex-dividend; the $19 in dividends collected over 5 years are added separately.
By both methods, the value today (DCF $143 · Multiples $93) exceeds the market price ($71).
Pillars of the analysis
The verdict — today vs 5 years
Today — fairly valued: at $71 trades ~23.5% below its value discounted to today (~$93); the discount is positive but does not reach the margin of safety we require (≥38%).
At 5 years — Infravalorado: the target price ($96) plus dividends yield above the required average return (10%) — the business compounds.
The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$60.
Thesis
The business
A regulated electric and gas monopoly in New England, now a pure regulated delivery business after selling Aquarion Water. The return is guaranteed on a rate base growing ~$5-6bn/year via capex, with risk concentrated in regulatory ROE decisions (FERC, PURA, DPU, NHPUC) rather than in demand.
The valuation
Valued on P/E over normalized (recurring non-GAAP) attributable net income, with an exit multiple of 15× within the utility band [15x-18x]. The projection starts from FY2026 guidance ($4.57-$4.72 EPS) rather than the trajectory, because the Aquarion sale and the FERC ROE cut are already-declared, verifiable events. The 5-year value in the base case is $96, implying a CAGR of +11%.
The margin of safety
It trades at a real discount to value, though short of the required margin of safety. At the market price (US$$71) the total annualized return (appreciation + dividend by IRR) is +11%, against the 15% hurdle for a great investment and the 10% average expected return. The current dividend yield of 4.4% accounts for most of the expected return, typical of a mature utility.
What to watch
The key disconfirmer is regulatory: if the four pending FERC claims cut the transmission ROE further, or if PURA/DPU tighten due to bill-affordability pressure, the earned ROE drifts further from the allowed ROE and the guided EPS path (5-7% annual) is not met. The second is dilution: with no buybacks and continued ATM issuances to fund capex, per-share EPS growth is structurally slower than aggregate net income growth.
Educational / informational. Does not constitute investment advice.