Eversource (ES) Q4 2025 earnings review
Wind Exit Complete, Capex Ramps Up, but Earnings Growth Remains Muted
Eversource has successfully transitioned back to a pure-play regulated utility, leaving behind the volatility of offshore wind which crushed prior year results. Q4 Revenue grew 13.4% YoY to $3.37B, and GAAP EPS rebounded to $1.12 from $0.20. However, the 'boring' utility business faces headwinds: Electric Distribution earnings fell 13.5% due to regulatory settlements, and Interest Expense jumped 15%. While the company unveiled an aggressive $26.5B 5-year capital plan, the 2026 guidance midpoint ($4.875) implies only ~2.4% growth over 2025, well below the long-term 5-7% target.
🐂 Bull Case
The massive offshore wind impairments (which caused a $1.47/share loss in FY24) are gone. Q4 2025 results were clean, with Non-GAAP EPS of $1.12 growing 11% YoY. The pending Aquarion Water sale is set to generate ~$1.6B cash to deleverage.
The Gas Distribution segment is firing on all cylinders, with earnings up 20% in Q4 ($123.6M vs $103.4M) driven by base rate increases in Massachusetts and Connecticut. Regulatory mechanisms are effectively recovering infrastructure investments.
🐻 Bear Case
Despite revenue growth, Electric Distribution earnings declined to $95.5M (from $110.4M). Management cited customer credit settlements in Massachusetts and higher O&M/Interest costs. This segment is the core business, and margin compression here is a significant concern.
Interest expense continues to climb, hitting $331M in Q4 (+15% YoY). With a $26.5B capital plan needing funding, financing costs remain a persistent drag on EPS growth, keeping the 2026 outlook muted.
⚖️ Verdict: ⚪
Neutral. The strategic pivot is successful, and the balance sheet is healing. However, the 2026 growth outlook (approx. 2.4%) is uninspiring for a utility promising 5-7% long-term. Execution on the expanded Capex plan without further equity dilution or credit degradation is the key risk.
Key Themes
Capital Plan Acceleration
Eversource raised its 5-year investment plan (2026-2030) to $26.5 billion, a significant increase from the previous $24.2 billion plan. This marks a clear 'Accelerating' trend in rate base growth ambition, focused heavily on electric transmission and distribution modernization. While this drives future earnings, it intensifies near-term financing needs.
Electric Distribution Margin Compression
A concerning divergence occurred in Q4: Electric Distribution earnings fell 13.5% YoY despite revenue growth. The primary culprits were a regulatory settlement charge at NSTAR Electric (MA) and rising O&M/Depreciation expenses. This segment is 'Decelerating' and lagging the Gas business significantly.
Natural Gas Rates Driving Growth
The Natural Gas segment is 'Accelerating', with full-year earnings up 24% ($360.5M vs $291.0M). This is directly attributable to successful rate case outcomes in Massachusetts and Yankee Gas (CT), proving that despite regulatory friction, the company retains pricing power in this segment.
Interest Expense Drag
Interest expense remains a major headwind, rising to $1.24B for FY25 from $1.11B in FY24. In Q4 alone, it rose $42M YoY. Management noted higher interest rates and higher debt levels. With the Aquarion sale pending (which would extinguish some debt), this line item remains the biggest threat to the bottom line.
Regulatory Settlements & Clean-Up
Q4 included multiple one-time items related to regulatory clean-up: a charge for NSTAR Electric credits, a settlement penalty for NSTAR Gas, but also a benefit from the recovery of Eversource Gas Company acquisition costs. While these make Q4 messy, they signal a desire to clear the decks for the new 5-year plan.
Other KPIs
Solid beat against the original 2025 guidance range of $4.50-$4.67 (implied from prior updates) and lands near the upper end of updated guidance. Represents 4.2% growth over 2024 ($4.57). Trend: Stable.
Management disclosed plans to raise significant equity between 2026-2030. This dilution is necessary to fund the $26.5B capex plan but limits EPS upside. Trend: Negative (Dilutive).
Up 7% YoY. This remains the most consistent performer, driven by FERC-regulated investments. Unlike the state-regulated distribution business, transmission offers cleaner growth with less political friction. Trend: Stable.
Guidance
Decelerating growth rate. The midpoint ($4.875) implies only ~2.4% growth over 2025 actuals ($4.76). This is disappointing relative to the reaffirmed 5-7% long-term target and suggests 2026 will be a transition year.
Stable. Management reaffirmed this target through 2030, using 2025 ($4.76) as the base. Given the soft 2026 guide, this implies a steep acceleration in earnings growth is required in 2027-2030.
Accelerating. An increase of $2.3 billion over the previous plan. Focus is on electric/gas distribution and transmission, signaling high confidence in rate base expansion despite financing costs.
Key Questions
Bridge to 5-7% Growth
With 2026 guidance implying only ~2.4% growth, specifically what mechanisms (rate cases, specific projects) accelerate growth to the 5-7% range in 2027 and 2028?
Electric Distribution Margins
Electric Distribution earnings fell in Q4. Aside from the one-time settlement credits, are you seeing structural pressure on O&M or unrecovered depreciation that will persist into 2026?
Aquarion Sale Confidence
The financing plan relies heavily on the Aquarion sale proceeds. Are there any remaining regulatory hurdles in CT or MA that could delay closing beyond the anticipated timeline?
Interest Expense Peak
Interest expense rose 15% YoY in Q4. Do you expect this line item to peak in 2026, or will the $26.5B capex plan continue to drive interest costs higher at a rate that outpaces revenue growth?