Analyst Upgrades Eversource, Projects 12% Upside Potential

Eversource Energy ES is attractively valued and remains poised for 12-percent upside from current levels, according to a Morgan Stanley analyst. 

The Analyst

Morgan Stanley analyst Devin McDermott upgraded shares of Eversource Energy from Equal-weight to Overweight and upped the price target from $70 to $72.

The company is one of the analyst's top large-cap regulated picks into 2018.

The Thesis

Eversource Energy stock gives no credit for the $1.6-billion Northern Pass Transmission, or NTP, project and values the core utilities at a discount, McDermott said in a Wednesday note. The low end of the company's 5-7 percent growth guidance is achievable even without NTP, McDermott said.

The analyst sees potential upside even without Northern Pass, and considers the project a "free option," worth up to $5 to $5.50 per share if it is completed.

The core utilities deserve a premium, given constructive regulatory relationships, a high-quality balance sheet, strong management team, limited exposure to tax reform and long-term growth driven by New England clean energy policies, according to Morgan Stanley. 

The Price Action

The shares of Eversource Energy are up over 16 percent year-to-date.

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