Endesa Shares Increase as RBC Describes Guidance as ‘Extremely Conservative’

Shares of Endesa SA experienced an increase after analysts at RBC Capital Markets noted that the company’s guidance for 2024 appears “extremely conservative” given the strong performance indicators in recent months.

As of 7:40 am (1140 GMT), Endesa SA’s stock was up by 1.6%, trading at €18.972.

RBC highlighted significant improvements in hydro and solar power generation during the third quarter, which, along with favorable gas market conditions, positions the Spanish energy giant for a potentially stronger financial year than originally anticipated.

In their analysis of Endesa’s upcoming nine-month results for 2024, RBC analysts projected an EBITDA of €3.815 billion, representing a 14% increase year-over-year, while EBIT is estimated to reach €2.265 billion, an increase of 19%.

The anticipated net income for the period is about €1.35 billion, which indicates a 27% increase from the previous year. These projections suggest that Endesa is on track to exceed its full-year guidance, especially given favorable trends in energy generation and reduced gas procurement costs.

A significant factor contributing to these expectations is Endesa’s integrated electricity margin, which has benefitted from a substantial rise in low-cost hydro and solar power generation.

Analysts expect high hydro output to rise by 68% year-on-year in Q3 2024, with solar generation increasing by 50%. Wind and nuclear power are also expected to add to the low marginal cost generation, leading to improved margins overall.

RBC noted the possibility that Endesa might surpass its current electricity margin guidance of €54 per MWh for the full year.

The company’s gas unit is anticipated to achieve higher-than-expected margins as well. RBC highlighted that favorable gas procurement costs under the Algerian contract, alongside a significant rise in spot gas prices, is expected to enhance profitability.

In Q3, MIBGAS spot prices have increased by about €10 per MWh since July, enabling Endesa to potentially exceed its guidance for a gas unit margin of over €2 per MWh.

Furthermore, the distribution segment in Spain has shown ongoing improvement, with cost savings leading to better performance.

RBC analysts believe that operational efficiencies, combined with favorable trends in power generation and gas procurement, will enable Endesa to deliver results exceeding the upper end of its full-year EBITDA guidance of €4.9 billion to €5.2 billion, as well as its net income targets of €1.6 billion to €1.7 billion.

Endesa is scheduled to release its complete nine-month results on October 30. RBC anticipates that the strong outcomes from the third quarter will likely positively influence the results for the fourth quarter, particularly due to current levels of hydro reservoirs and improving supply margins.