On Thursday, CFRA maintained a Hold rating on National Grid (LON:NG) (NYSE:NGG) but increased the price target from $60.00 to $70.00. The adjustment reflects a revised 12-month target price based on a forward price-to-earnings (P/E) ratio of 15.7x, consistent with the company's five-year forward P/E average.
Despite the price target increase, CFRA has adjusted its earnings per share (EPS) estimates for the fiscal year 2024 to £3.50 from £3.75 and for fiscal year 2025 to £3.65 from £3.80.
National Grid recently published its Beyond 2030 report, emphasizing the urgency to enhance the UK's electricity network to accommodate the growing demand from renewable energy sources. In response to this need, National Grid has announced a substantial investment plan totaling £58 billion. This plan includes expanding the offshore power grid and constructing a new electrical spine that will run from north to south, enabling the transfer of electricity produced in Scotland to the north of England.
In addition to the UK investments, National Grid is set to invest over $4 billion in infrastructural improvements to the electrical grid in Upstate New York. These investments are seen as consistent with the view that electricity infrastructure is critical in achieving net-zero emissions.
National Grid's business model, which is highly regulated and offers protection against price and volume risk, is expected to bolster its defensive profile in the market.
CFRA's maintained Hold rating indicates a neutral stance on the stock, suggesting that while there are positive aspects to National Grid's investment strategy and business model, investors may wish to remain cautious.
The firm's analysis points to the company's initiatives as being well-aligned with broader environmental goals, potentially providing stability in a market that is increasingly focused on sustainable and resilient infrastructure development.
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