Iberdrola lifts profit outlook on strong U.S., U.K. networks

Iberdrola has raised its full-year adjusted net profit target to 6.6 billion euros, projecting double-digit growth, following a 17% year-on-year increase in adjusted earnings to 5.1 billion euros for the first nine months of 2025, which exceeded analyst consensus. This strong performance was primarily driven by robust regulated network operations in the U.S. and U.K., despite some offsetting factors like higher service costs and weaker U.K. energy production. The Spanish utility also declared an interim dividend of 0.25 euros per share, with analysts noting continued earnings visibility due to its balanced investment in regulated growth and renewables.

Analysis

Iberdrola reported a robust 17% year-on-year rise in adjusted earnings for the first nine months of 2025, reaching 5.1 billion euros, surpassing Bloomberg consensus of 4.9 billion euros. This strong performance led the company to raise its full-year adjusted net profit target to 6.6 billion euros, now projecting double-digit adjusted profit growth, an upgrade from its previous mid-to-high single-digit range. The reported net income of 5.3 billion euros included a 382-million-euro capital gain from the sale of its U.K. smart meter business, and an interim dividend of 0.25 euros per share was declared.

The improved outlook is primarily driven by strong network performance and regulated operations in the United States and the United Kingdom, which continue to underpin earnings and cash flow expansion. While RBC analysts noted support from ENW integration and U.K. capital allowances, higher service costs following summer blackouts in Spain and Portugal, alongside weak performance in the U.K. energy production, partially offset these gains. EBITDA rose 4.4% to 12.1 billion euros, aligning with expectations, and net debt remained stable at 48.5 billion euros.

Funds from operations increased 10% to 9.8 billion euros, supporting a 4% growth in capital expenditure to nearly 9 billion euros, reflecting continued strategic investment in renewables and networks. RBC maintained its "Sector Perform" rating and 17-euro price target, highlighting that Iberdrola's balanced strategy of regulated growth and renewables investment provides crucial earnings visibility despite near-term headwinds and demonstrates fundamental resilience.

Key Decisions for Investors

• Investors should consider Iberdrola for long-term portfolios, given its upgraded double-digit profit growth guidance, robust regulated asset performance in the U.S. and U.K., and commitment to renewables investment.
• Monitor potential impacts from operational headwinds, specifically higher service costs in Iberia and weaker U.K. energy production, which could affect future profitability despite current mitigation.
• Evaluate the sustainability of the interim dividend of 0.25 euros per share in light of the company's stable net debt, increased funds from operations, and the slightly rising average cost of debt at 4.72%.