National Grid (NG) AI Stock Analysis

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National Grid

(LSE:NG)

67Neutral

National Grid's stock score is driven by stable financial performance with strong margins, but offset by high leverage and cash flow challenges. Technical analysis shows a neutral trend, while valuation is supported by a decent P/E ratio and high dividend yield. Positive earnings call guidance and strategic investments add to the score, despite operational challenges.

Positive Factors

Growth Potential

The plan includes significant investments on the existing network and network expansion, indicating strong future growth potential.

Investment Plan

The £35bn Totex plan is a step change in investment well flagged and expected by the market.

Negative Factors

Earnings Timing

Underlying EPS is expected to be weighted towards the second half of the year as is usual for the business.

Regulatory Review

Regulatory review next milestone 11th December.

National Grid (NG) vs. S&P 500 (SPY)

Market Cap

£47.66B

Dividend Yield5.52%

Average Volume (3M)11.75M

Price to Earnings (P/E)22.6

Beta (1Y)0.74

Revenue Growth-6.68%

EPS Growth-77.57%

CountryUK

Employees31,425

SectorUtilities

Sector Strength90

IndustryRegulated Electric

Share Statistics

EPS (TTM)0.43

Shares Outstanding4,897,123,500

10 Day Avg. Volume12,565,092

30 Day Avg. Volume11,745,770

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)2.49

Price to Cash Flow (P/CF)9.20

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

1,111.50p

Price Target Upside9.83% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering7

National Grid Business Overview & Revenue Model

Company DescriptionNational Grid plc transmits and distributes electricity and gas. The company operates through UK Electricity Transmission, UK Electricity Distribution, UK Electricity System Operator, New England, and New York segments. The UK Electricity Transmission segment provides electricity transmission and construction work services in England and Wales. The UK Electricity Distribution segment offers electricity distribution services in Midlands, and South West of England and South Wales. The UK Electricity System Operator segment provides balancing services for supply and demand of electricity on Great Britain's electricity transmission system; and acts as an agent on behalf of transmission operators. The New England segment offers electricity and gas distribution, and electricity transmission services in New England. The New York segment provides electricity and gas distribution, and electricity transmission services in New York. It also engages in the provision of transmission services through electricity interconnectors and LNG importation at the Isle of Grain; sale of renewables projects; and leasing and sale of commercial property, as well as insurance activities in the United Kingdom. The company was founded in 1990 and is headquartered in London, the United Kingdom.

How the Company Makes MoneyNational Grid makes money through several key revenue streams, primarily from the regulated transmission and distribution of electricity and gas. In the UK, the company operates electricity transmission networks and gas distribution networks, earning revenue through tariffs regulated by Ofgem, the UK energy regulator. In the United States, National Grid owns and operates electricity and gas distribution networks in states like New York, Massachusetts, and Rhode Island, where revenue is generated through rates approved by state public utility commissions. Additionally, National Grid is involved in non-regulated activities such as energy services and solutions, which provide ancillary revenue, including renewable energy projects and energy efficiency services. Significant partnerships with government bodies and other utilities, as well as investments in modernizing infrastructure and integrating renewable energy sources, are crucial factors that contribute to its earnings.

National Grid Financial Statement Overview

Summary

National Grid demonstrates strong operational efficiency with high gross and EBIT margins. However, inconsistent revenue growth and declining net income have affected profitability. The balance sheet shows typical industry leverage, posing potential risks due to high debt levels. Cash flow challenges, specifically in free cash flow, need addressing to secure long-term stability.

Income Statement

Positive

The company exhibits solid gross profit and EBIT margins, indicative of strong operational efficiency. However, there has been a decline in net profit margin from the previous year, primarily due to a significant drop in net income. Revenue growth has been inconsistent, with a notable decline in the most recent year. Despite these challenges, the company's EBITDA margin remains healthy, suggesting resilience in core earnings.

Balance Sheet

Positive

National Grid shows a moderately high debt-to-equity ratio, reflecting a significant use of leverage, which is typical in the utilities sector. The equity ratio is stable, indicating a balanced capital structure. However, the Return on Equity has decreased, signaling potential issues in generating returns for shareholders. While the balance sheet is stable, the high leverage could pose risks if interest rates rise.

Cash Flow

Neutral

The cash flow statement reveals challenges in free cash flow generation, with negative free cash flow in the latest year due to high capital expenditures. Despite this, the operating cash flow remains strong, exceeding net income, which indicates good cash-generating capability from operations. The company needs to address its capital expenditure to improve free cash flow sustainability.

Mar 2024	Mar 2023	Mar 2022	Mar 2021	Mar 2020
Breakdown
Income Statement		Total Revenue
19.85B	21.66B	18.26B	14.78B	14.54B
	Gross Profit
14.55B	13.04B	12.16B	12.40B	11.95B
	EBIT
4.47B	4.88B	4.37B	2.90B	2.78B
	EBITDA
6.83B	6.91B	6.27B	3.89B	4.36B
	Net Income Common Stockholders
2.29B	7.80B	2.35B	1.64B	1.26B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
4.25B	2.77B	3.35B	2.50B	2.07B
	Total Assets
98.33B	92.70B	94.86B	67.22B	67.09B
	Total Debt
47.07B	42.98B	45.47B	31.22B	30.79B
	Net Debt
46.52B	42.82B	45.26B	31.06B	30.72B
	Total Liabilities
68.43B	63.13B	71.00B	47.36B	47.51B
	Stockholders Equity
29.87B	29.54B	23.83B	19.84B	19.56B
Cash Flow		Free Cash Flow
-514.00M	6.00M	728.00M	-327.00M	-282.00M
	Operating Cash Flow
6.94B	6.90B	6.27B	4.46B	4.62B
	Investing Cash Flow
-7.50B	240.00M	-14.01B	-5.12B	-3.19B
	Financing Cash Flow
987.00M	-7.17B	7.77B	750.00M	-1.61B

National Grid Technical Analysis

Technical Analysis Sentiment

Positive

Last Price1012.00

Price Trends

50DMA

974.81

Positive

100DMA

965.60

Positive

200DMA

969.99

Positive

Market Momentum

MACD

11.10

Negative

RSI

64.47

Neutral

STOCH

92.10

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GB:NG, the sentiment is Positive. The current price of 1012 is above the 20-day moving average (MA) of 993.01, above the 50-day MA of 974.81, and above the 200-day MA of 969.99, indicating a bullish trend. The MACD of 11.10 indicates Negative momentum. The RSI at 64.47 is Neutral, neither overbought nor oversold. The STOCH value of 92.10 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for GB:NG.

National Grid Risk Analysis

National Grid disclosed 9 risk factors in its most recent earnings report. National Grid reported the most risks in the “Macro & Political” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

National Grid Peers Comparison

Overall Rating

UnderperformOutperform

Sector (65)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DRX	71 Outperform	£1.96B	3.97	26.02%	4.45%	-22.46%	-3.74%
SVT	71 Outperform	£7.68B	32.89	17.17%	4.64%	5.38%	86.34%
SSE	71 Outperform	£16.86B	8.68	21.94%	3.99%	-13.09%	231.40%
NG	67 Neutral	£47.66B	22.55	5.28%	5.52%	-6.68%	-77.57%
Sector *	65 Neutral	$11.75B	15.50	6.20%	4.60%	5.53%	-8.93%
UU	64 Neutral	£7.13B	62.95	5.50%	4.83%	8.61%	―
PNN	53 Neutral	£2.18B	―	-4.09%	7.65%	20.25%	-128.71%

* Utilities Sector Average

Performance Comparison

GB:NG

National Grid

1,012.00

125.31

14.13%

GB:DRX

Drax Group plc

550.00

67.42

13.97%

GB:PNN

Pennon Group plc

457.80

-13.32

-2.83%

GB:SVT

Severn Trent

2,586.00

316.87

13.96%

GB:SSE

SSE

1,553.50

-39.46

-2.48%

GB:UU

United Utilities

1,067.00

108.40

11.31%

National Grid Earnings Call Summary

Earnings Call Date: Nov 7, 2024 | % Change Since: 4.62% | Next Earnings Date: May 15, 2025

Earnings Call Sentiment Positive

The earnings call reflects National Grid's strong financial performance and strategic positioning for future growth through increased investments and successful regulatory engagements. However, challenges in equipment supply and lower profitability in specific ventures present areas for improvement.

Highlights

Record Investment in Capital Projects

National Grid's investment reached a record £4.6 billion in the first half, marking a 19% increase year-on-year at constant currency.

Successful Rights Issue Completion

The company completed a £7 billion rights issue, positioning its balance sheet for future growth.

Strong Financial Performance

Underlying operating profit increased by 15% to £2 billion, with underlying earnings per share up 8% to 28.1p.

Positive Regulatory Developments

New rates agreed for New York and Massachusetts businesses, providing greater investment plan visibility.

Reliable Service Delivery

Despite severe weather, reliability remains strong across UK and US networks with rapid outage restorations.

Lowlights

Lower Profit in National Grid Ventures

A decrease of £70 million in underlying profit due to adjustments and lower profitability across US Ventures businesses.

Challenges in Securing Equipment

Concerns over long lead times for critical transformers and equipment supply constraints.

Company Guidance

During the National Grid Half Year Results Presentation, CEO John Pettigrew provided guidance on the company's strategic initiatives and financial performance. National Grid plans to invest around £60 billion in its networks over the next five years, with £4.6 billion already invested in the first half of the fiscal year. The company successfully completed a £7 billion rights issue to bolster its balance sheet. In the U.S., regulated CapEx increased by 20% year-on-year, driven by a $4 billion upgrade program in upstate New York. The UK electricity transmission capital investment rose by 43% to £1.3 billion, with significant progress on major projects like the London Power Tunnels. National Grid reported an operating profit of £2 billion, a 15% increase from the prior year, and declared a 15.84p per share interim dividend. The company's focus remains on delivering a low-risk, high-quality asset growth strategy, with strong earnings growth and an inflation-protected dividend.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.