On Monday, Barclays adjusted its stance on Consolidated Edison (NYSE:ED), downgrading the utility company's stock from Equal Weight to Underweight. The firm also revised its price target downward to $92 from the previously set $97.
The adjustment reflects Barclays' view that the stock is currently overvalued, taking into account anticipated outcomes from ongoing regulatory rate cases and the next General Rate Case (GRC) cycle for Consolidated Edison Company of New York (CECONY).
Barclays' analysis suggests that the market has prematurely factored in positive results from the Orange & Rockland (O&R) rate case and a higher Return on Equity (ROE) in the upcoming CECONY GRC cycle.
Additionally, the firm believes there is only a slight potential for earnings per share (EPS) to surpass consensus expectations at this time. However, Barclays anticipates that investors may not see the expected financial uplift until the GRC cycle concludes between January 2025 and fall 2025.
The firm also pointed out that CECONY comprises a significant portion of its estimated EPS for 2026, accounting for 93%. The eventual rate filing, according to Barclays, is likely to impact Consolidated Edison's stock multiple negatively. Despite acknowledging the company's strong balance sheet, Barclays has adjusted the premium on the shares to 5% from the previous 15%.
Furthermore, Barclays sees limited opportunities for Consolidated Edison in terms of DC-related spending and does not anticipate a significant change in execution or strategy following the appointment of Kirk Andrews as the new Chief Financial Officer. This outlook suggests a conservative view on the company's near-term growth prospects and financial performance.
In other recent news, significant changes have been announced in the executive leadership of Consolidated Edison and Evergy (NASDAQ:EVRG). Consolidated Edison has appointed Kirkland B. Andrews as the new CFO, following the retirement of Robert Hoglund.
Andrews, who previously held CFO positions at public utilities, including Evergy, will assume his new position on July 8, 2024. Evergy, in turn, has appointed Geoffrey Ley as interim CFO following Andrews' departure.
Further, Mizuho Securities has revised its outlook on Consolidated Edison, increasing the company's price target from $93 to $95 while maintaining a neutral stance. However, Mizuho has decreased its 2024 earnings estimates for Consolidated Edison by approximately $0.17 per share.
These recent developments highlight the dynamic nature of the business landscape in which Consolidated Edison and Evergy operate. It's worth noting that both companies are undergoing these changes while continuing their commitment to financial strategy and operational excellence.
InvestingPro Insights
In light of Barclays' recent downgrade of Consolidated Edison (NYSE:ED), it's valuable to consider additional market data and insights. According to InvestingPro, Consolidated Edison has a track record of stability, having raised its dividend for 49 consecutive years and maintained dividend payments for 54 consecutive years. This consistency is underscored by a notable dividend yield of 3.53% as of the last twelve months leading up to Q1 2024. Investors may find comfort in the company's low price volatility, which is a characteristic that often appeals to those seeking defensive investment options during uncertain market conditions.
InvestingPro data also highlights a market capitalization of $32.52 billion and a P/E ratio of 18, suggesting that the company is being traded at a price that reflects its earnings. While the revenue has seen a decline of 9.2% over the last twelve months as of Q1 2024, the gross profit margin remains strong at 52.58%, indicating the company's ability to maintain profitability despite revenue fluctuations. Moreover, analysts predict that Consolidated Edison will remain profitable this year, which could provide a counterbalance to concerns over potential declines in net income.
For those interested in a deeper analysis, InvestingPro offers additional insights and metrics. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and discover even more InvestingPro Tips to inform your investment decisions. There are currently 5 additional tips available for Consolidated Edison on InvestingPro, which could further guide investors in understanding the company's financial health and market position.
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