SSE’s share price has lit up investor portfolios this year: the Perth-based energy supplier has upped earnings guidance not once, but twice. Heightened energy prices have helped boost earnings. However, in this week’s results for the year ending 31 March shareholders will be expecting an update on SSE’s renewable plans, which could influence where the stock goes next.
SSE’s [SSE.L] share price has powered higher this year. Driving the gains are bumper earnings stemming from the still-heightened cost of energy. SSE has also turbo-charged the amount that it is investing in renewables as part of its Net Zero Acceleration Programme. The energy major plans to invest £24bn in the UK’s energy infrastructure by the end of the decade.
Heading into Wednesday’s results, SSE has been in the news, having won a battle with the UK tax authority over whether it could claim capital allowances on its Glendoe hydroelectric plant in Scotland: the UK’s supreme court ruled that it can, to the tune of around £200m, in a big win for SSE’s renewable ambitions.
Yet the extent to which investment into renewables eats into SSE’s top and bottom line could affect what happens to the stock post-earnings.
What’s happening with SSE’s share price?
Year-to-date, SSE’s share price has gained 9.1%, easily outpacing the wider FTSE 100. The stock did dip just over 1% last week to close Friday 19 May at 1,868p. Over the one-year period SSE’s share price is down 2.33%, but remains close to its 52-week high of 1,933p.
SSE upped its full-year earnings expectations from more than 150p per share to 160p per share back in March. This was the second time SSE has upped its guidance this year (the previous target had been earnings of at least 120p per share), with the energy company saying the improved outlook reflected the strength of its regulated and market-facing businesses.
For the period ending 31 March, SSE has said that it expects its balance sheet to strengthen with net debt and hybrid capital to come in under £9bn.
A promised update on its Net Zero Acceleration Programme will be the big-ticket item at this week’s earnings. SSE has committed heavily to investing in renewables, going as far as to reduce its dividend pay-out to shareholders. The company expects to report capital expenditure (including acquisitions) of over £2.5bn.
Despite betting on clean energy, SSE said that it had generated 13% less electricity than planned from its renewable sources by 23 March. This is up from the 10% shortfall seen at the end of December. Output from SSE’s gas-fired plants helped make up the shortfall in renewables in the nine months to 31 December, contributing 14,250 GWH, up from 11,187 GWH for the same period the previous year.
Shareholders will want to see progress on wind farm project Seagreen, which is due to be completed in summer 2023. Look out for expansion into hydrocarbon, carbon capture, solar and batteries. SSE is reported to be planning a second battery energy storage facility in West Yorkshire.
SSE has managed annual revenue growth of 23.2%, according to analysis from Simply Wall St. Whether it can maintain this impressive growth rate will be another item to watch.
Where next for SSE’s share price?
Companies like SSE have benefited from volatility in the energy markets triggered by Russia's invasion of Ukraine. With prices still heightened, it will be interesting to see how SSE’s traditional gas business performs, and whether this can balance the increased spend on renewables.
For income seekers, SSE said that it expects to reward shareholders with an 85.7p dividend per share for the year ending 31 March. However, this will then be rebased to 60p per share for 2023/24 to free up cash, with SSE promising a 5% annual growth in pay-outs thereafter: a sharp reminder that dividends are never guaranteed.
SSE’s share price has a 2,050p 12-month median target from analysts tracking it. Hitting this would see a 9.7% upside on Friday’s close.
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