Con Ed Earnings: New York Energy Infrastructure Investments Drive Long-Term Growth

We are reaffirming our $89 per share fair value estimate for Consolidated Edison ED after the company reported earning $1.62 per share on an adjusted basis during the third quarter, mostly flat with the third quarter of 2022. We are reaffirming our no-moat rating.

Aside from the lost earnings from the clean energy business sale that closed in March, higher operating and financing costs partially offset benefits from electric rate increases implemented earlier this year following a rate review at ConEd’s largest subsidiary, Cecony. We expect the interest cost drag to ease in the coming quarters as ConEd uses proceeds from the clean energy business sale to retire parent-level debt.

Management raised the midpoint of their EPS guidance range by $0.10 to $5.05, representing the high end of management’s beginning-year guidance range. This change doesn’t have a material impact on our fair value estimate.

We are maintaining our long-term forecasts and 6% annual average earnings and dividend growth estimates through 2025, in line with management’s 5%-7% target.

Con Ed’s usage-decoupled rate structures have protected it from the weather-related earnings volatility many other utilities have experienced this year.

The Cecony electric rate decision finalized in July will boost earnings through 2025. Rates reflect 6% annual rate base growth, $15 billion of capital investment in 2023-25, and a 9.25% allowed return on equity, up from Cecony’s previous 8.8% return on equity. Con Ed also has a pending steam rate settlement with the same allowed ROE that would support earnings growth into 2026.

Work is progressing on Con Ed’s 20-year New York gas system plan proposal initially filed in May. Discussions could provide clues about how regulators will set rates for Con Ed’s gas system as New York aims to eliminate carbon emissions.