Eversource (ES) Q1 2026 Earnings Transcript

Eversource reported Q1 2026 non-GAAP EPS of $1.73, up from $1.50 last year, but GAAP EPS was $1.61 after a $43.9 million after-tax charge tied to the FERC ROE ruling. Management cut 2026 non-GAAP EPS guidance to $4.57-$4.72, implying a roughly $70 million after-tax hit from the base transmission ROE reduction to 9.57%, while reaffirming 5%-7% long-term EPS growth. Offsetting pressures include expected $2 billion of storm-cost securitization cash, $1.5 billion of junior subordinated notes issued in February, and potential mid- to late-2026 resolution on Aquarion and the 205 filing.

Analysis

The key read-through is that ES is trying to convert a regulatory hit into a balance-sheet de-risking story, and the market will likely treat the next 6-9 months as a sequence of binary catalysts rather than a clean earnings reset. The adverse FERC action is a near-term EPS headwind, but the more important second-order effect is that it raises the value of any constructive state-level recovery, because every incremental dollar of storm securitization or rate-base approval now has a larger marginal impact on equity needs and credit optics.

The setup is asymmetric because the company has pushed out several potential cash inflections into the same window: Aquarion closing by mid-June, Connecticut storm recovery later in 2026, New Hampshire securitization potentially into 2027, and a 205 filing that could reprice transmission returns before year-end. That creates a near-term pressure-release valve for liquidity, but it also means ES can look better or worse very quickly depending on whether these items are monetized in sequence. If two of the three land, the equity raise narrative gets postponed; if one slips, the stock likely re-rates lower on financing overhang rather than earnings alone.

The contrarian point is that the market may be over-anchored to the headline ROE cut and underestimating how much optionality is embedded in the transmission filing process. Management is effectively telegraphing a path to re-establish a materially higher prospective ROE using the same FERC framework; even a partial settlement would be enough to blunt the 2026/2027 earnings drag. The real risk is not the announced guidance cut, but a prolonged legal stalemate that keeps the refund issue alive into 2027 and forces investors to price ES like a capital-intensive utility with unresolved regulatory beta rather than a cleaner derisking story.

Key Decisions for Investors

• Long ES on weakness over the next 1-3 weeks, but only as a catalyst trade: target into Aquarion appeal expiration and any 205 procedural milestone; thesis is 8-12% upside if financing overhang fades, with stop-loss on any new adverse litigation or delay.
• Pair trade: long ES / short a more rate-sensitive regulated utility with less near-term regulatory optionality over 3-6 months; ES has more self-help from securitization and transmission repricing, while the short leg is exposed to duration without comparable catalysts.
• Use ES Jan-2027 call spreads rather than outright equity if available; the risk/reward is best around the year-end 205 implementation window, with upside from prospective ROE reset and limited downside to premium if courts slow the process.
• If the stock rallies sharply on settlement headlines, fade strength into the next 5-10% move unless there is evidence the refund reserve risk is fully ring-fenced; the market may be pricing the cleanest outcome before legal clarity exists.