National Grid’s Strategic Resilience Amid Earnings Miss: Why Regulated Growth Triumphs Over Near-Term Headwinds

LONDON, May 16, 2025 — National Grid (LON:NG) recently reported a near-term earnings miss that sent shockwaves through the utilities sector. Yet beneath the headline numbers lies a story of strategic resilience: a £60 billion capital program, regulatory tailwinds, and inflation-linked dividends position this infrastructure giant as a defensive powerhouse, even as short-term headwinds cloud its earnings. For investors seeking stability in volatile markets, National Grid’s long-term growth trajectory—and the analyst consensus that remains undeterred—makes it a compelling buy.

The Earnings Miss in Context: A Temporary Setback, Not a Structural Flaw

National Grid’s full-year 2025 results revealed a 7.4% revenue decline and a 12% miss on earnings per share (EPS), driven by storm-related costs, underperformance of the UK’s Real Price Effects (RPE) mechanism, and project delays. While these challenges are real, they are neither permanent nor indicative of structural weakness.

The earnings shortfall was largely due to one-off events, such as the £143 million hit from Storm Darragh and £303 million in impairments tied to paused offshore wind projects. Meanwhile, the RPE mechanism, designed to adjust for commodity price fluctuations, underdelivered due to falling indices—a temporary issue as regulators work to recalibrate the system.

Crucially, National Grid’s £60 billion five-year capital program remains intact, with FY2025 investments surging 20% to £9.85 billion. Projects like the UK’s ASTI transmission infrastructure and the US’s Upstate Upgrade in New York are advancing, supported by regulatory approvals and robust demand for grid modernization.

Regulatory Protections: A Shield Against Volatility

National Grid operates in a highly regulated, low-risk environment, where returns are tied to capital investments rather than volatile commodity prices. In the UK, Ofgem’s mechanisms ensure that costs for critical projects like gas mains replacement and renewable energy connections are passed through to consumers. Similarly, US regulators have greenlit rate plans in Massachusetts and New York, enabling National Grid to recover costs and earn stable returns.

This framework insulates the company from macroeconomic shocks. While the RPE mechanism’s underperformance in FY2025 caused short-term pain, the system’s design allows for adjustments over time. Over the long term, National Grid’s regulated asset base grows at ~10% annually, underpinning its superior growth trajectory. Analysts project revenue growth of 6.7% by 2026—well above the European utilities industry’s 4.0% forecast—due to this steady regulatory tailwind.

Dividend Resilience: A Safe Harbor in Uncertain Markets

National Grid’s dividend is a cornerstone of its appeal. Despite the earnings miss, the company raised its final dividend by 3.2% to 46.72p, maintaining its pledge to grow dividends in line with UK CPIH. With a yield of 4.6%, this makes it a magnet for income-focused investors.

The dividend’s stability stems from National Grid’s inflation-linked revenue streams. Over 90% of its earnings come from regulated assets, which are contractually tied to inflation indices. This model ensures cash flows remain robust even during economic downturns.

Analysts’ Confidence: Why Price Targets Remain Steady

Despite the earnings miss, analysts have kept consensus price targets unchanged at £11.44, with some upgrades—Barclays raised its target to £12.50, citing confidence in the capital program. The narrow range between the highest (£12.50) and lowest (£9.70) estimates reflects consensus that National Grid’s regulated model and growth pipeline justify its valuation.

The resilience of these targets underscores a key truth: short-term EPS dips are outweighed by long-term asset growth. Analysts now project FY2026 EPS of £0.69, a 20% rise from FY2025’s £0.60, as regulatory tailwinds and capital investments kick in.

Risks? Yes. But They’re Manageable

No investment is risk-free. National Grid faces execution risks on projects like the delayed Eastern Green Links 1 wind farm and rising debt (now £41.4 billion post-equity raise). However, these risks are mitigated by strong balance sheet metrics, hedged supply chains, and a track record of delivering regulated projects on time.

Why Act Now? The Time for Strategic Buys is Here

National Grid’s shares trade at a 12-month forward price-to-earnings ratio of 19x, slightly below its five-year average of 21x, offering a discount for investors who see beyond the near-term. With interest rates stabilizing and inflation pressures easing, the company’s inflation-linked dividends and regulated growth model are uniquely positioned to thrive.

In a market hungry for stability, National Grid’s defensive profile—coupled with its unmatched regulated asset portfolio and analyst-backed valuation—makes it a rare opportunity. The earnings miss is a speed bump, not a roadblock.

Final Call: Invest with Confidence

For investors seeking to hedge against volatility, National Grid offers a compelling mix of predictable cash flows, inflation protection, and regulated growth. The near-term headwinds are temporary, while the long-term story is unassailable. The time to act is now—before the market catches up to this strategic gem.

Investor Takeaway: National Grid’s strategic resilience, bolstered by its £60 billion capital program and regulatory protections, makes it a must-own defensive play. Despite the earnings miss, the stock’s valuation, dividend strength, and superior growth trajectory justify immediate consideration.