Morningstar

Uncertainty Around Numerous Strategic Initiatives Continues to Cloud Avangrid’s Long-Term Growth

Here is our take on the company’s earnings report.

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Securities In This Article
Avangrid Inc
(AGR)

We are maintaining our $41 per share fair value estimate for Avangrid AGR after the company reported full-year 2022 adjusted earnings of $2.33 per share, compared with $2.18 in 2021. Our narrow moat and stable moat trend remain unchanged. Our $2.20 operating EPS estimate for 2023 is at the bottom end of the company’s 2023 EPS guidance range of $2.20 to $2.35. We remain below the company’s annual earnings growth guidance of 6% to 7% based on expectations for headwinds during regulatory proceedings and offshore wind development.

Uncertainty continues around Avangrid’s offshore wind ambitions. At Commonwealth Wind, the company initiated termination of its purchased power agreement for the project. While the company plans to offer into upcoming auctions in Massachusetts, we think securing new contracts will prove difficult due to strained regulatory relationships and escalating costs. Stakeholder negotiations continue with Park City Wind.

We view the company’s onshore renewable growth more favorably, given the relative favorable economics and reduced execution risk. The company currently has 1.4 gigawatts of onshore renewable energy projects under construction.

For New England Clean Energy Connect, or NECEC, the company continues to work through the courts to prove economic viability of the project. The proposed PNM acquisition agreement was extended as Avangrid continues to work toward regulatory approval. We exclude both from our estimates. At the company’s regulated utilities, it is working toward settlements in key regulatory filings in New York and Maine, and has an open rate case in Connecticut. We expect supportive outcomes across the company’s regulatory proceedings.

In 2022, results were aided by new utility rates, an offshore wind restructuring gain, favorable renewable energy production, and pricing and tax benefits. Partially offsetting these benefits were higher interest costs, depreciation, and operating costs.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Andrew Bischof, CFA

Strategist
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Andrew Bischof, CFA, CPA, is a strategist, AM Resources, for Morningstar*. He covers electric, gas and water utilities. He conducts comprehensive research and analysis on his covered companies to provide insights into investment opportunities. He assesses financial statements, competitive advantages, and economic indicators to determine a stock’s intrinsic value. He is a five-time Morningstar Outstanding Research Achievement award winner, which recognizes thought leadership and equity research quality as voted on by senior management.

Before joining Morningstar in 2011, Bischof worked in treasury for Mead Johnson Nutrition. Previously, He was a group audit officer for Bank of America in Chicago, and before that, an auditor for Ernst & Young.

Bischof holds a bachelor’s degree in business administration and accounting and a master’s degree in accounting from the University of Wisconsin. He also holds a master’s degree in business administration, with a concentration in finance, from Indiana University’s Kelley School of Business. Additionally, he holds the Chartered Financial Analyst® and Certified Public Accountant designations.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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