Morgan Stanley | Rob Pulleyn reviews his sector coverage as a preview of results, with expectations of continued outperformance over Europe (up 14% YTD and 21% from lows). However, the market maintains an underweight position on the sector and the valuation is still at a discount of -10% in PE versus a long-term premium of 1-2%. Rob maintains his preference for large cap integrated and regulated companies, offering the greatest relative strength in the short term, given their defensive profile. The team’s expectations are positive, in view of the results. Specifically, with regard to Spanish companies, they comment:
- Acciona: Arthur Sitbon believes that the reaction to the results may be slightly negative due to wind conditions in Q1 and lower energy prices. He expects management to confirm its financial targets for 2025, and sees some downside to consensus on 2026 EBITDA. The announcement of an asset rotation agreement could generate a more positive reaction to profits.
- Enagás: Arthur expects a neutral reaction. He believes that FY24 results will be in line with expectations and that management will reiterate financial targets for FY25. He believes that the tone regarding Spanish regulation will be more positive than a few months ago, but that this aspect is already priced in.
- Endesa: Rob expects a modest positive reaction, with solid 1Q25 results thanks to hydroelectric generation. He also expects the guidance for 2025 to be maintained.
- Iberdrola: Rob also expects a modest positive reaction in the shares after a good YTD performance. He believes we will see solid Q1 2025 results, with no big surprises, along with unchanged FY25 guidance.
- Redeia: Arthur believes the reaction will be neutral. He expects results in line with expectations for 2025, with no changes to the FY25 guidance.
- Solaria: Arthur also expects a neutral reaction for Solaria. He believes that the results for 1Q25 will be weak, and that the 2025 EBITDA guidance is very ambitious, but that these aspects are already discounted by the market. The key factors will be I) indications regarding asset rotation/data centre agreements, II) evolution of capacity increase targets and III) solar energy prices in the first weeks of spring.
