Eversource Takes a Hit as Regulators Reset ROE and Trigger Refund Risk

Core Viewpoint - Eversource Energy faces a significant impact from the Federal Energy Regulatory Commission (FERC) Opinion No. 594, which resets the base Return on Equity (ROE) to 9.57%, resulting in a 100 basis point drag on earnings in 2026, but Bank of America maintains a Buy rating with a price target of $73, indicating a potential upside of 7% from current levels [2][6]. Financial Performance - Eversource's rate base is projected to grow from $30.6 billion to $49.3 billion by 2030, supported by a $26.5 billion five-year capital plan [2][11]. - The company has increased its quarterly dividend to $0.7875 per share, yielding approximately 4.49% [2][11]. Regulatory Environment - The new FERC ruling narrows the spread between Eversource's allowed ROE and Treasury yields, which may pressure near-term earnings [3][6]. - Eversource's transition to a pure-play regulated utility is expected to support long-term earnings growth, with management guiding for 5% to 7% long-term EPS growth through 2030 [11]. Market Position - Eversource's stock has seen a decline of 11.51% over the past month, currently trading at $67.44, while still holding an 11.84% gain over the past year [4]. - The stock is below its 52-week high of $76.41, with a consensus target of $74.92 from analysts, reflecting a cautious outlook [4]. Analyst Insights - Bank of America analyst Ross Fowler has adjusted the price target for Eversource to $73 from $82, citing headwinds from the new FERC ruling, but maintains a Buy rating [6]. - Goldman Sachs holds a more bullish Buy rating with an $80 target, suggesting that the upside case is credible if regulatory challenges are resolved [8]. Key Drivers - The key conditions for Eversource to reach the $73 target include meeting 2026 EPS guidance of $4.80 to $4.95, resolving FERC refund obligations without significant earnings erosion, and favorable regulatory outcomes in key states [8].