<Results Alert> 4Q/FY23 results in-line, FY24F outlook within expectations
- 4Q23/FY23 non-GAAP EPS in-line, at upper end of management’s guidance, with healthy dividend yields
- Risk of equity financing removed with PNM Resources merger abandoned
- All eyes on catalysts: Connecticut rate case appeal, Vineyard Wind Project, NECC Project, renewables growth and long-term strategy release. Maintain HOLD with unchanged TP of US$31.
4Q23/FY23 results in-line with expectations. Avangrid 4Q23 and FY23 non-GAAP EPS were in-line with expectations at US$0.97 (+258% qoq, +149% yoy) and US$2.09 respectively, with FY23 EPS seeing a -10% impact yoy, dragged down by an absence of offshore wind gain and higher taxes. The latest FY23 results was at the upper end of management’s adjusted EPS guidance (before transactions) of US$1.95-$2.08, noting a lack of extraordinary gains from renewable transactions (partial sale of asset and onshore partnerships). Operationally, Avangrid has commissioned an additional 0.3GW of renewable capacity over the year, reaching 8.6GW as of end 2023. Avangrid declared 4Q23 and 1Q24 DPS of US$0.44, in-line with its preceding quarters and with expectations, which implies an annualised FY23/24 DPS of US$1.76 (flat yoy) and healthy dividend yield of 5.5%, at +2.5 SD above its historical average yield of 4%.
All eyes on Connecticut rate base appeal, NECEC completion, Vineyard Wind 1 project and renewable transactions; Maintain HOLD. Going forward, management guides 2024 adjusted EPS at US$2.17-2.31, which translates into a +8% growth from its midpoint of US$2.25, which are within consensus’ FY24E EPS estimate of US$2.27. While Avangrid will not be proceeding with its PNM Resources merger due to regulatory hurdles, this removes the risk of equity issuance/dilution for investors. Going forward, future growth and positive catalysts would include (i) Connecticut rate cases (recently filed an appeal in lieu of its unfavourable regulatory decision), (ii) completion of New England Energy Connect transmission (NECEC) in 2025 (on schedule), (iii) commercial operation of Vineyard Wind 1 offshore wind project in 2024, and (iv) future renewables growth (with another 1GW under construction, at 12% of current capacity). Avangrid will also be unveiling its long-term outlook update in 21 March 2024, which is a key catalyst to watch. Maintain HOLD with unchanged TP of US$31, as we believe Avangrid’s near-term outlook is priced in. Avangrid is currently trading at forward EV/EBITDA ratios of 9.3x (near -2SD of historical range) with forward dividend yields of 5.5% (at +2.5 SD above its historical yield of 4%).