Goldman Sachs Downgrades Consolidated Edison Despite Positive View On Utilities

Consolidated Edison, Inc’s ED stock does not reflect the risk to consensus and guidance for yearend and 2021 from elevated COVID-19-related costs, according to Goldman Sachs.

The Consolidated Edison Analyst: Insoo Kim downgraded Consolidated Edison from Neutral to Sell, while reducing the price target from $86 to $78.

The Consolidated Edison Thesis: Consolidated Edison’s New York utility, which comprises almost 90% of the company’s earnings in 2021, could continue experiencing a negative cash impact, Kim said in the note.

He explained that the “potential COVID-19 related cash impact from increasing aged receivables/bad debt, lost customers, and non-collection of late fees could increase financing needs and ultimately weigh on earnings power.”

“Our analysis points to potential for over $1bn of cash drag in 2H2020-2021, leading to 2%-4% of EPS impact from elevated debt/equity financing,” the analyst wrote.

Kim added, however, that Utilities are viewed “as relative winners from potential tax reform, while the inflation impact should be manageable based on our GS strategist’s forecast of a 2% near-to-medium term level.”

ED Price Action: Shares of Consolidated Edison had risen by 0.56% to $81.26 at the time of publication Tuesday.