Eversource (ES) Q3 2026 Earnings Call Transcript

Eversource reported third-quarter non-GAAP recurring EPS of $0.92, down from $1.19 a year earlier, citing a lower transmission ROE, a roughly $40 million Connecticut storm-cost disallowance, the Aquarion sale and a higher tax rate. It narrowed 2026 non-GAAP EPS guidance to $4.62–$4.70, raising the midpoint to $4.66, and reaffirmed its $26.5 billion five-year utility investment plan through 2030. The company is also preparing for a potentially complex FERC refund process, while management said storm-cost securitization and Aquarion sale proceeds support its balance sheet and financing flexibility.

Analysis

The central question is whether rate-base growth can convert into earned returns without being offset by regulatory leakage and financing costs. Connecticut’s storm-cost disallowance is a warning that planned investment does not guarantee recovery: affordability scrutiny may constrain both the requested rate relief and the pace of future capex. PBR could smooth customer impacts, but it also makes the allowed earnings path more dependent on formula design and performance metrics.

Near term, the FERC refund is the main asymmetric risk. A difficult reconciliation process is not itself an economic loss, but an earlier GAAP charge could hit reported earnings before cash leaves, while uncertainty around the final amount complicates credit headroom. Conversely, storm-cost securitization would reduce carrying costs and support financing flexibility; it does not eliminate the risk that regulators disallow other costs. The prospective ROE decision also matters beyond the immediate transmission earnings effect: a lower allowed return weakens the economics of incremental transmission investment.

Over 1–3 months, focus on refund quantification/accounting and the prospective ROE decision; over 6–18 months, the CL&P rate-case outcome and financing mix determine whether the capital plan supports the stated growth target or requires more equity. The proposed transmission project and grid-modernization programs offer longer-term rate-base potential, but the DOE award is not yet evidence of material earnings contribution. The contrarian point: the growth narrative may understate execution and dilution risk, while the near-term headline earnings decline may overstate the damage if securitization and rate relief proceed. No valuation data or refund estimate is provided, so an outright directional call is premature.

Key Decisions for Investors

• Stay neutral on ES into the FERC accounting/ROE disclosures rather than buying the higher guidance midpoint alone. Reassess when the company quantifies the potential refund charge and its effect on rating-agency cushion.
• Conditional trade: after those disclosures, consider long ES versus XLU only if refund exposure is bounded, credit metrics remain comfortably above downgrade thresholds, and the prospective ROE outcome does not further impair transmission returns. Exit or avoid if the estimated charge or financing plan materially weakens that cushion.
• Treat CL&P’s final rate-case decision and storm securitization approvals as 6–18 month catalysts. Falsifiers for the constructive case are material additional disallowances, a materially weaker rate order than requested, or equity issuance rising beyond the stated plan as incremental capex is added.
• Monitor whether the $700 million transmission opportunity is included in the next capital-plan update and whether funding assumptions change; until then, do not capitalize the project or DOE grant as assured earnings growth.