安特吉(Entergy)

Entergy reported earning $1.03 per share on an adjusted basis during the second quarter, down from $1.05 in the same period last year. Results are on track to meet our 2026 forecast and management's guidance range.

Why it matters: Higher financing costs during the quarter offset the benefit from higher customer revenue, including electricity demand growth. Higher revenue during the third quarter should boost full-year earnings. Industrial electricity demand, which represents about half of Entergy's systemwide demand, is up 12% during the first half of 2026 year over year. Our 2026 EPS estimate is in line with management's $4.25-$4.45 guidance, implying 11% growth. This assumes historically normal weather after hot summers in 2024 and 2025.

The bottom line: We are reaffirming our $91 per share fair value estimate and our narrow moat rating for Entergy. Entergy's stock is up 23% year to date, including dividends, making it one of the top performing US utilities. We forecast 9% annual earnings growth through 2029. Management reaffirmed its $6.25-$6.55 EPS target range by 2029, in line with our outlook.

Big picture: Management reaffirmed its $67 billion capital investment plan for 2026-30, which it presented at its investor day in June. Entergy's investment plan goes beyond new power generation to serve data centers. Entergy plans to expand its systemwide resiliency investments, in part using payments from data centers to minimize customer bill impacts. Management reaffirmed its 7-12 GW probability-weighted data center pipeline. However, this pipeline doesn't include potential significant expansions of existing projects, similar to the expansion Meta announced earlier this year.

Coming up: Key regulatory decisions expected by year-end include a base rate review in Arkansas and approval of more than $15 billion to support the previously announced Meta data center expansion in Louisiana.

Our fair value estimate is $91 per share after incorporating year-to-date financial and operating updates.

We expect energy use in Entergy's service territories to grow faster than at most US utilities, primarily due to growth in industrial customers such as data centers in the Southeast. This demand growth along with investments in system resiliency and renewable energy support our assumption that Entergy's capital investment during the next five years will top management's $67 billion plan.

Entergy's capital investment opportunities, combined with constructive regulation across most of its service territories, support our 10% average annual earnings-per-share growth forecast through 2029.

Earnings growth could top that rate in 2029 and beyond if Entergy continues investing in new generation and grid expansion to serve large customers like data centers. We incorporate nearly $10 billion of planned investment in new gas generation, renewable energy, transmission, and battery storage for two Meta data centers in Louisiana alone.

We use a 6% cost of capital in our discounted cash flow valuation, which incorporates a 7% cost of equity. Our cost of equity is lower than the 9% rate of return we expect investors will demand of a diversified equity portfolio.

We believe Entergy has a narrow economic moat.

Constructive regulatory environments for Entergy’s five regulated vertically integrated utilities are the foundation of its narrow moat. Entergy’s utilities own difficult-to-replicate networks of power generation, transmission, and distribution assets that provide essential electricity service to customers.

Service territory monopolies and efficient scale advantages are the primary moat sources for regulated utilities like Entergy. State and federal regulators grant Energy’s utilities exclusive rights to charge customers rates that allow the utilities to earn a fair return on and return of the capital they invest to build, operate, and maintain their distribution networks.

In exchange for Entergy’s service territory monopolies, state and federal regulators set returns at levels that aim to minimize customer costs while offering fair returns for capital providers. This implicit contract between regulators and capital providers should, on balance, allow Entergy’s regulated utilities to earn more than their costs of capital, though observable returns might vary in the short run based on demand trends, investment cycles, operating costs, and access to financing.

Entergy's utilities all operate with formula rate plans that adjust revenue annually to match operating and capital costs. This reduces regulatory lag and enhances earned returns on capital. Large bilateral data center contracts should boost earned returns.

Within this regulatory framework, the threat of material long-term value destruction is low, and normalized returns should exceed Entergy’s cost of capital, leaving us comfortable assigning a narrow moat rating.

Entergy exited its no-moat Northeast merchant generation business in 2022 and no longer has direct exposure to wholesale energy markets.

Access to cheap, abundant energy in Entergy's Gulf Coast service territory are driving strong industrial development, including data center growth.

In October 2025, the board raised the dividend by 7%, marking the fifth consecutive year of 6% or larger dividend increases. We expect similar dividend growth for the foreseeable future.

We believe the decision to exit the Northeast merchant nuclear business demonstrates good capital allocation, allowing Entergy to direct more investment to its regulated utilities.

Gulf Coast storms could result in large unplanned operating and capital costs that Entergy might not be able to recover from customers.

Entergy's large capital investment plan has construction execution risk, especially the large power generation projects it is developing.

Rising interest rates and inflation can slow earnings growth and make utilities like Entergy a less attractive income investment.