Eversource (ES) Q2 2026 earnings review
Strategic De-Risking Achieved, But Legacy Costs and Regulatory Cuts Crush Quarter
Eversource delivered a messy Q2, characterized by a massive divergence between its strategic wins and its statutory income statement. While operating revenue remained stable, growing 2.3% YoY, GAAP Net Income reversed course violently, plunging 85% to $53.7 million. This collapse was driven by two massive one-time hits: a $111.4 million charge to finally close the Aquarion Water sale, and a deeply frustrating $164 million additional charge for offshore wind liabilities. Even looking at Non-GAAP recurring EPS, earnings are decelerating—dropping to $0.87 from $0.96 a year ago—as the FERC-mandated cut to transmission returns took a noticeable bite out of operating profits. Despite the noise, management reaffirmed its FY26 guidance and 5-7% long-term growth targets, pointing to a newly fortified balance sheet fueled by $1.7 billion in fresh cash from the Aquarion divestiture.
🐂 Bull Case
The Aquarion Water sale finally closed on June 30, bringing in $1.7 billion in net equity proceeds. This allows Eversource to immediately displace parent debt and drastically improves its FFO-to-Debt cushion, largely eliminating the need for near-term equity issuances.
ISO-NE preliminarily selected the Avangrid/Eversource proposal for a $2.2 billion transmission project to bring power from northern Maine. This secures long-term rate base expansion well beyond the current 2030 forecast.
🐻 Bear Case
Despite selling its offshore wind assets in 2024, Eversource recorded yet another contingent liability charge of $164 million for South Fork and Revolution Wind. The financial bleeding will not truly stop until the Commercial Operation Date (COD) is reached.
The reduction in allowed ROE from 10.57% to 9.57% actively depressed Electric Transmission earnings by $0.07 per share this quarter. If the D.C. Circuit Court appeal fails, this creates a permanent structural headwind to the company's most reliable growth engine.
⚖️ Verdict: ⚪
Hold. The strategic pivot to a pure-play electric and gas utility is complete, and the balance sheet is materially stronger. However, the recurring EPS deceleration caused by the FERC ruling and the persistent, unpredictable offshore wind charges make it difficult to justify immediate aggressive buying until the regulatory dust settles.
Key Themes
The Offshore Wind Albatross Lingers
Management has repeatedly touted the 'de-risking' of the business, yet the data contradicts this clean narrative. Q2 included a staggering $164 million after-tax charge to increase the contingent liability owed to Global Infrastructure Partners for the South Fork and Revolution Wind projects. Until Revolution Wind achieves its COD (expected year-end), Eversource investors remain exposed to offshore construction risks despite no longer owning the assets. This is a reversing trend for profitability predictability.
FERC ROE Cut Depressing Earnings
The pain from the March 2026 FERC decision is now highly visible. Electric Transmission segment earnings decelerated from $0.56 per share to $0.49 per share YoY, entirely reflecting the base ROE reduction from 10.57% to 9.57%. While Eversource is fighting back with a Section 205 filing (requesting 11.39%), the current reality is a lower baseline return on a massive portion of their $26.5 billion capital plan.
ISO-NE Transmission Win Fuels Out-Year Growth
Eversource secured a major victory with the preliminary selection of its joint $2.2 billion transmission project by ISO-NE. This project, utilizing existing right-of-ways to connect northern Maine to southern New England, represents a stable, regulated growth driver with an expected in-service date by the end of 2032. It adds powerful upside to the existing $26.5 billion 5-year capital plan.
Liquidity Infusion Solidifies Balance Sheet
The $1.7 billion in adjusted net equity proceeds from the Aquarion Water sale removes significant financing risk. By using these funds to immediately displace parent debt, Eversource is accelerating its path to maintaining an FFO-to-Debt ratio 100 basis points above downgrade thresholds (12% S&P, 13% Moody's). This stable trajectory drastically reduces the risk of dilutive equity issuances.
Grid Modernization and AMI Deployment
The company continues to lean into technology to drive efficiency and rate base growth. Beyond its $26.5B baseline capex, management noted a $1 billion incremental opportunity for Advanced Metering Infrastructure (AMI) in Connecticut. Combined with the ongoing Underground Cable Modernization Program, Eversource is actively swapping analog infrastructure for smart-grid technology, which provides a long runway for regulated returns.
Macro Pressures Highlight Affordability Focus
With inflation and higher interest rates pressuring consumers, Eversource is carefully managing regulatory relationships. The recently filed CL&P rate case in Connecticut requests a $451 million base deficiency increase. Management is explicitly emphasizing an 'affordability framework' alongside its requests, knowing that regulators are highly sensitive to customer bill shock in the current macroeconomic environment.
Other KPIs
Accelerating slightly. Earnings grew to $170.4M from $161.5M a year ago, adding $0.01 to EPS. This was driven by successfully implemented base distribution rate increases in Massachusetts and New Hampshire, proving the company's core mechanism for capital recovery is functioning properly despite higher interest expense and depreciation.
Decelerating in the quarter. Earnings fell from $35.3M last year ($0.10 to $0.08 per share). Management attributed the drop primarily to the absence of a unique 2025 benefit from previously expensed costs allowed for recovery. However, on an H1 basis, the segment is up significantly due to rate increases effective late last year.
Guidance
Stable. The company reaffirmed its revised guidance (midpoint $4.65), which was lowered earlier this year to account for the FERC ROE cut and the removal of H2 Aquarion earnings. This implies a slight deceleration compared to FY25's $4.76, strictly due to regulatory headwinds rather than operational failures.
Stable. Management maintained its commitment to this CAGR, using the revised 2026 midpoint ($4.65) as the new base year. Furthermore, they explicitly state they expect to trend toward the upper half of this range by 2028, signaling confidence in the execution of the $26.5B capital plan.
Accelerating base investment. This represents a $2.3 billion increase over the prior five-year plan, heavily weighted toward Electric Distribution ($11B+) and Transmission ($7B+). It fully excludes the sold Aquarion footprint.
Key Questions
Offshore Wind Liability Cap
The $164 million charge this quarter suggests the cost exposure to Revolution Wind delays is higher than previously modeled. What is the absolute contractual maximum liability remaining before COD is achieved, and what specific delays triggered this quarter's revision?
ISO-NE Project Execution
Regarding the $2.2 billion ISO-NE preliminary preferred solution, how will capital deployment be phased over the next 6 years, and what percentage of that $2.2 billion will be added directly to Eversource's rate base versus Avangrid's?
FERC O&M Flex
If the D.C. Circuit Court denies the stay and the Section 205 filing is delayed, does the company have sufficient un-deployed O&M flex in the second half of 2026 to defend the bottom end of the $4.57 EPS guidance?
CL&P Rate Case Strategy
The CL&P rate case requests a $451 million base deficiency and a 10.25% ROE. Given PURA's recent historically combative posture, how is management positioning the affordability metrics to prevent punitive cuts to the requested 54% equity ratio?