Endesa shares gain 4 as FY net income beat estimates

Endesa shares gain 4 as FY net income beat estimates

Endesa Shares Rise on Strong Earnings Beat Amid Regulatory Uncertainty

Endesa (ELE) shares climbed 4% following the release of third-quarter financial results that exceeded analyst expectations, driven by reduced financial expenses and robust performance in its generation segment according to earnings reports. The Spanish utility reported net income of €670 million, surpassing Jefferies and FactSet estimates by 11% and 14%, respectively. EBITDA rose 3% year-on-year to €1.5 billion, with conventional generation contributing a 31% year-over-year increase, partially offset by weaker network performance.

The company's strong earnings were supported by favorable gas market conditions and operational efficiency, including the removal of a 1.2% regulatory levy that had previously impacted results. For the first nine months of 2025, Endesa's net income surged 22% to €1.711 billion, with EBITDA reaching €4.224 billion, confirming its full-year guidance of up to €5.6 billion in EBITDA and €2 billion in net profit.

Despite the earnings beat, regulatory challenges persist. Management highlighted that Spain's proposed distribution network remuneration framework clearly does not provide adequate support for critical grid investments, which are essential to meet decarbonization and electrification goals. Grid capacity constraints remain acute, with Endesa reporting 83% saturation as of early September 2025, forcing the rejection of new connection requests.

Valuation models suggest the stock is trading at a premium to historical averages, with TIKR projecting a potential decline to €30 per share by 2027, implying negative annualized returns. Jefferies maintained a "hold" rating, citing a €25 price target, while analysts noted limited upside in the near term due to regulatory risks and margin pressures.

Endesa's strategic focus on renewables and grid modernization continues, with recent acquisitions and a €500 million share buyback program underscoring its capital allocation priorities. However, the balance between regulatory uncertainty, capital-intensive investments, and dividend sustainability remains a key challenge for investors.

This article is for informational purposes only and does not constitute investment advice.