SSE shares down 2% as first-half EPS guidance falls short of analyst forecast

SSE Plc shares declined over 2% after the company projected first-half FY25-26 earnings per share between 33p and 37p, which Jefferies noted as 'a small negative' and 'on the low end,' signaling modest near-term earnings pressure despite expectations for broadly unchanged full-year performance. This forecast coincides with a projected 60% year-on-year increase in adjusted first-half capital expenditure to £1.1 billion for network and renewable investments, alongside progress on strategic projects like the Berwick Bank offshore wind farm, with net debt forecast at approximately £11.5 billion.

Analysis

SSE Plc's shares declined over 2% following its fiscal 2025-26 first-half trading update, which projected earnings per share between 33p and 37p. While the company noted this aligns with seasonal trends where the first half typically contributes 20-30% of annual earnings, brokerage Jefferies characterized the midpoint as a "small negative" and "on the low end," representing approximately 23% of its 156p full-year estimate. This near-term earnings pressure is directly linked to an aggressive capital investment program, with first-half adjusted capex projected to increase 60% year-over-year to £1.1 billion for network and renewable projects. Despite the weak 1H EPS outlook, SSE expects full-year performance to remain broadly unchanged, though no formal guidance was issued. Operationally, strong second-quarter renewable output offset poor weather in the first quarter, but total first-half generation is still expected to be down 2% year-on-year at 5.3 TWh. On a positive note for the long-term outlook, the company is making progress on key growth projects, securing major consent for its Berwick Bank offshore wind farm, which clears it for entry into the UK AR7 auction. The company's balance sheet appears managed, with net debt forecast at £11.5 billion, slightly below Jefferies' estimate.

Key Decisions for Investors

• Investors should weigh the near-term earnings pressure, driven by a 60% surge in capital expenditure, against the long-term growth potential from strategic renewable projects like the Berwick Bank wind farm.
• Monitor for formal full-year guidance from the company to gain clarity beyond the current "broadly unchanged" outlook and watch for the results of the UK's AR7 auction, a key catalyst for the Berwick Bank project.
• Consider the stock's recent price decline as a potential entry point for a long-term position, while remaining mindful of risks from weather-related volatility in the renewables segment and the execution of the large-scale investment plan.