National Grid H1 trading in-line with expectations, guidance reiterated

National Grid Plc (LON:NG) reported first-half fiscal 2026 trading in line with expectations, reaffirming full-year EPS guidance at the lower end of its 6-8% growth range. While current consensus EPS of 76.9p is below the company's 77.7p lower-end target, this gap is primarily attributed to a more cautious foreign exchange assumption by analysts. Morgan Stanley indicates that operational performance is stable and future adjustments to consensus estimates are more likely to be driven by foreign exchange developments, with potential for upward pressure if FX rates align closer to the company's assumptions.

Analysis

National Grid's first-half fiscal 2026 trading update confirms performance is in line with expectations, leading to a reaffirmation of its full-year earnings guidance. The company targets EPS growth at the lower end of its 6-8% range, which translates to approximately 77.7p per share. However, current analyst consensus of 76.9p, representing approximately 5% year-over-year growth, sits below this target. This discrepancy is not attributed to operational shortfalls but rather to differing foreign exchange assumptions, with analysts using a more cautious ~1.35 GBP/USD rate compared to the company's 1.30 assumption. Morgan Stanley's analysis indicates that this gap is purely a translation effect, implying potential for upward revisions to consensus estimates should the currency trend closer to the company's forecast. Operational performance remains stable, with a typical second-half skew expected in the U.S. business, albeit less pronounced than the prior year due to fewer storm-related impacts. Given that consensus estimates are already below the company's guidance floor, no immediate revisions are anticipated, with future adjustments likely to be driven by FX developments rather than fundamentals.

Key Decisions for Investors

• Investors should closely monitor the GBP/USD exchange rate, as a move closer to the company's 1.30 assumption represents a key potential catalyst for upward revisions to consensus earnings estimates.
• The current valuation gap, where consensus EPS trails the company's guidance, should be viewed through the lens of currency translation risk rather than an operational deficiency, given that underlying business performance is tracking in line with expectations.
• While the report signals operational stability, it is prudent to monitor for the ET-3 Final Determination expected in early December as a future regulatory event, although the primary short-term variable remains foreign exchange.