Iberdrola’s Q1 2025 Surge in Net Profit Masks EPS Miss—Is This a Buy?

Iberdrola (IBDSF), the Spanish energy giant, delivered a mixed bag of results in its Q1 2025 earnings report. While net profit soared 26% year-over-year to €4.002 billion, the company fell short of expectations on earnings per share (EPS), missing forecasts by a striking 16.7%. This juxtaposition raises critical questions: Is the stock a buy now, or are the risks overshadowing the headline growth? Let’s dig in.

The Good News: A Strong Net Profit Surge

The Q1 results highlight Iberdrola’s dominance in renewable energy and grid infrastructure. Net profit jumped to €4.002 billion, fueled by:
- Grid investments: Plans for €13 billion in network infrastructure through 2026, which could boost EBITDA by €800 million annually.
- Renewable projects: Ongoing expansions in offshore wind (e.g., the St. Brieuc farm in France) and pumped storage, aligning with its goal to lead the global green energy transition.
- Geopolitical diversification: 22% of investments in the U.S., 19% in the UK, and 15% in Latin America, reducing reliance on any single market.

The Bad News: EPS Misses and Wall Street’s Shrugging

Despite the net profit boom, EPS came in at €0.302—far below the €0.3624 expected. The stock dipped just 0.38% post-earnings, closing at €15.67, but this muted reaction hints at investor skepticism. Analysts are asking: Why the gap between net profit and EPS?

• Cost pressures: Rising operational expenses or one-time charges not disclosed in the transcript.
• Excluded subsidiaries: The report excludes Neoenergia S.A., its Brazilian unit, which might have diluted results.

The Ugly: Risks Lurking in the Shadows

Iberdrola’s long-term vision faces hurdles that could crimp returns:
1. Regulatory headwinds: In the U.S. and EU, shifting policies could disrupt tariff agreements and investment timelines.
2. Economic uncertainty: A slowdown in global demand for energy or delays in renewable projects could strain margins.
3. Geopolitical risks: Tensions in Latin America and Europe could disrupt operations, though the company downplays U.S. tariff impacts.

The CEO’s Pitch: Electrification Is the Answer

Executive Chairman Ignacio S. Galán doubled down on Iberdrola’s core strategy: “Electrification is the right answer to global challenges.” The company projects mid- to high-single-digit net profit growth in 2025, with double-digit gains possible if U.S. past cost adjustments are factored in. This confidence is rooted in:
- ESG leadership: Recognized for top-tier ESG programs and board governance.
- Strong cash flow: Funds from operations rose 11% to €502 million, funding aggressive expansion.

Verdict: Buy the Dip?

The stock’s 20% year-to-date gain and 42% return over the past year suggest investors are betting on Iberdrola’s long-term narrative. The EPS miss is a bump in the road, not a derailment. Key data points to watch:
- Q2 2025 results: Can the company rebound on EPS?
- Regulatory clarity: Updates on U.S. and EU policies will impact investment timelines.

Final Take

Iberdrola remains a titan in the renewable energy space, with a fortress balance sheet and a strategy that’s paying off. The Q1 EPS miss is a speed bump, not a red flag. For investors willing to look past near-term noise, this could be a buying opportunity. But tread carefully: The stock’s 0.64 beta suggests it’s less volatile than the market, but geopolitical and regulatory risks are real.

Bottom Line: Iberdrola’s Q1 results are a glass half-full story. If you’re in for the long haul, the dividend yield of 4.2% and its role in the energy transition make it a compelling hold. But don’t ignore the risks—it’s not a “set it and forget it” stock.

Data as of Q1 2025. Past performance does not guarantee future results.