Analysts Review Utility Provider Results

National Grid and SSE reported solid results this week; Morningstar analysts dig into the numbers to see what it means for shareholders 

Morningstar Equity Analysts 12 November, 2015 | 3:43PM
Facebook Twitter LinkedIn

National Grid

We are reaffirming our £8 per share fair value estimates for National Grid (NG.) after the firm reported earning 28.4p per share in the first half of fiscal 2016 and announced plans to sell its UK gas distribution business. Management also reaffirmed its goal to increase the dividend at least in line with inflation and raised the interim dividend 2%.

Given the rich premiums paid for gas distribution utilities in the United States recently, it is possible a sale would lead us to raise our fair value estimate. However, gas distribution is a relatively small part of National Grid, so the impact would probably be minimal. We agree with management that a sale would free up capital to deploy to its faster-growing transmission business.

Management guided toward the lower end of its £16 billion-20 billion eight-year investment plan and 6% asset growth based on recent changes in UK energy policy. National Grid expects new interconnections during the eight-year period through fiscal 2021 to be less than half what it expected in 2013. Some of that forgone investment could be redirected to make the grid more efficient rather than larger. We continue to assume National Grid invests £2 billion annually in the UK through 2019.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
National Grid PLC1,002.40 GBP0.00Rating
SSE PLC1,607.50 GBP0.00Rating

About Author

Morningstar Equity Analysts  Morningstar stock and fund analysts cover 2,000 mutual funds, 2,100 equities, and 300 exchange-traded funds.