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National Grid (GB:NG)
LSE:NG
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National Grid
(LSE:NG)
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Rating:72Outperform
Price Target:
1,156.00p
▲(11.69% Upside)
National Grid's strong earnings call performance and reasonable valuation are key strengths, contributing positively to the overall score. However, technical indicators suggest caution with potential overbought conditions, and financial performance is tempered by high leverage and cash flow challenges.
Positive Factors
Capital Investment
National Grid's significant capital investment underscores its commitment to infrastructure growth, enhancing its long-term asset base and competitive position in the energy sector.
Regulated Asset Growth
The growth in regulated assets strengthens National Grid's revenue stability and market position, ensuring predictable cash flows and resilience against market volatility.
Dividend Growth
Consistent dividend growth reflects strong financial health and a commitment to returning value to shareholders, supporting long-term investor confidence.
Negative Factors
High Leverage
High leverage can constrain financial flexibility and increase risk, particularly in volatile markets, potentially impacting future investment and growth opportunities.
Negative Free Cash Flow
Negative free cash flow indicates potential liquidity issues, limiting the company's ability to fund new projects or return capital to shareholders without additional financing.
Revenue Fluctuations
Fluctuating revenue trends can hinder financial predictability and planning, affecting long-term strategic initiatives and potentially eroding market confidence.
National Grid (NG) vs. iShares MSCI United Kingdom ETF (EWC)
Market Cap
£51.35B
Dividend Yield4.51%
Average Volume (3M)7.68M
Price to Earnings (P/E)16.8
Beta (1Y)0.71
Revenue Growth-7.42%
EPS Growth5.84%
CountryUK
Employees31,425
SectorUtilities
Sector Strength65
IndustryRegulated Electric
Share Statistics
EPS (TTM)0.45
Shares Outstanding4,961,316,000
10 Day Avg. Volume9,297,860
30 Day Avg. Volume7,677,019
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)N/A
P/FCF RatioN/A
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
£1,214.00Price Target Upside17.29% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering10
National Grid Business Overview & Revenue Model
Company DescriptionNational Grid plc transmits and distributes electricity and gas. The company operates through UK Electricity Transmission, UK Electricity Distribution, UK Electricity System Operator, New England, and New York segments. The UK Electricity Transmission segment provides electricity transmission and construction work services in England and Wales. The UK Electricity Distribution segment offers electricity distribution services in Midlands, and South West of England and South Wales. The UK Electricity System Operator segment provides balancing services for supply and demand of electricity on Great Britain's electricity transmission system; and acts as an agent on behalf of transmission operators. The New England segment offers electricity and gas distribution, and electricity transmission services in New England. The New York segment provides electricity and gas distribution, and electricity transmission services in New York. It also engages in the provision of transmission services through electricity interconnectors and LNG importation at the Isle of Grain; sale of renewables projects; and leasing and sale of commercial property, as well as insurance activities in the United Kingdom. The company was founded in 1990 and is headquartered in London, the United Kingdom.
How the Company Makes MoneyNational Grid generates revenue primarily through its regulated utility operations, which include the transmission and distribution of electricity and gas. The company earns money by charging customers for the energy they consume, based on rates set by regulatory authorities. Additionally, National Grid benefits from long-term contracts for electricity and gas transportation services. Key revenue streams include charges for the use of its transmission networks, which are typically regulated and provide stable cash flows. The company also invests in renewable energy projects and energy efficiency programs, contributing to its revenue through various incentives and government subsidies. Strategic partnerships with energy suppliers and involvement in market mechanisms further enhance its earnings potential.
National Grid Earnings Call Summary
Earnings Call Date:May 15, 2025
(Q4-2025)
| % Change Since: |
Next Earnings Date:Nov 06, 2025
Earnings Call Sentiment Neutral
The earnings call highlights National Grid's robust performance with record investments, growth in regulated assets, and strong profits, despite challenges like storm impacts and project delays. The company appears well-positioned for future growth, but must address specific challenges in project execution and regulatory mechanisms.Q4-2025 Updates
Positive Updates
Record Capital Investment
Delivered a record capital investment of £9.8 billion, which is in line with their plan and 20% higher than last year.
Strong Underlying Operating Profit
Underlying operating profit increased by 12% to £5.4 billion at constant currency.
Regulated Asset Growth
Achieved regulated asset growth of 10.5%.
Dividend Growth
Declared a final dividend of 30.88p per share, taking the total dividend for the year to 46.72p, an increase of 3.21%.
New York Rate Plans Success
Agreed new rates for Niagara Mohawk with an improved return on equity of 9.5% and increased CapEx by 50% over three years.
Negative Updates
Storm Darragh Impact
Storm Darragh significantly impacted the UK Electricity Distribution network, causing costs and affecting incentive revenues.
Community Offshore Wind Impairment
Recognized an accounting impairment on Community Offshore Wind due to policy uncertainty, resulting in a £303 million write-down.
EGL1 Project Delays
Eastern Green Links 1 project is delayed by 16 months, and Ofgem may impose a penalty.
RPE Mechanism Issue in Electricity Distribution
Lower-than-anticipated allowances from Ofgem's real price effects mechanism did not track actual costs, impacting returns.
Company Guidance
During National Grid's full-year results presentation, CEO John Pettigrew outlined significant financial and operational achievements, emphasizing the company's commitment to a £60 billion capital investment plan, projecting asset growth of approximately 10% per annum, and underlying earnings per share growth of 6% to 8%. The company reported a record capital investment of £9.8 billion, a 20% increase from the previous year, alongside an underlying operating profit increase of 12% to £5.4 billion. Despite geopolitical and economic challenges, National Grid maintained a robust balance sheet and declared a final dividend of 30.88p per share, marking a 3.21% increase over the previous year's rebased dividend. The company also highlighted its strategic infrastructure projects, including advancements in its ASTI portfolio and regulatory progress in both the UK and the U.S. National Grid's comprehensive financing strategy, including a £7 billion equity raise, ensures funding clarity until at least 2031, underscoring its financial resilience and commitment to delivering secure, affordable, and clean energy.National Grid Financial Statement Overview
Summary
National Grid shows strong operational efficiency and effective use of equity, but faces challenges with revenue fluctuations and high leverage. Profitability indicators are robust, yet cash flow inconsistencies and debt levels require careful management for sustained growth.Income Statement
The company demonstrates a solid gross profit margin consistently over 100%, indicating strong pricing power and cost control. However, its net profit margin shows volatility, with a noticeable dip in 2024. Revenue has experienced fluctuations, with a declining trend in recent years, impacting overall financial performance. Despite this, EBIT and EBITDA margins remain robust, pointing to operational efficiency.75
Positive
Balance Sheet
The company's balance sheet reveals a high level of debt, with a debt-to-equity ratio exceeding 1. This leverage poses potential risks in volatile markets. However, the return on equity remains relatively strong, demonstrating effective use of equity capital. The equity ratio shows a stable capital structure, reflecting a balanced asset financing strategy.70
Positive
Cash Flow
The cash flow statement highlights challenges with negative free cash flow in recent years, which could limit investment opportunities. Free cash flow growth has been negative, showing inconsistencies in cash generation. Yet, the operating cash flow to net income ratio remains healthy, indicating good cash conversion from earnings.65
Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 18.38B | 18.38B | 19.85B | 21.66B | 18.26B | 14.78B |
| Gross Profit | 4.76B | 14.23B | 14.55B | 13.04B | 12.16B | 12.40B |
| EBITDA | 7.27B | 7.63B | 6.83B | 6.91B | 6.27B | 3.89B |
| Net Income | 2.90B | 2.90B | 2.29B | 7.80B | 2.35B | 1.64B |
Balance Sheet | ||||||
| Total Assets | 106.74B | 106.74B | 98.33B | 92.70B | 94.86B | 67.22B |
| Cash, Cash Equivalents and Short-Term Investments | 6.93B | 6.93B | 4.25B | 2.77B | 3.35B | 2.50B |
| Total Debt | 48.36B | 48.36B | 47.07B | 42.98B | 45.47B | 31.22B |
| Total Liabilities | 68.92B | 68.92B | 68.43B | 63.13B | 71.00B | 47.36B |
| Stockholders Equity | 37.80B | 37.80B | 29.87B | 29.54B | 23.83B | 19.84B |
Cash Flow | ||||||
| Free Cash Flow | -2.74B | -2.50B | -514.00M | 6.00M | 728.00M | -327.00M |
| Operating Cash Flow | 6.04B | 6.81B | 6.94B | 6.90B | 6.27B | 4.46B |
| Investing Cash Flow | -10.80B | -10.57B | -7.50B | 240.00M | -14.01B | -5.12B |
| Financing Cash Flow | 5.53B | 4.53B | 987.00M | -7.17B | 7.77B | 750.00M |
National Grid Technical Analysis
Negative
1035.00
Price Trends
1048.61
Negative
1045.56
Negative
995.78
Positive
Market Momentum
-2.90
Negative
46.97
Neutral
33.83
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GB:NG, the sentiment is Negative. The current price of 1035 is below the 20-day moving average (MA) of 1036.22, below the 50-day MA of 1048.61, and above the 200-day MA of 995.78, indicating a neutral trend. The MACD of -2.90 indicates Negative momentum. The RSI at 46.97 is Neutral, neither overbought nor oversold. The STOCH value of 33.83 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for GB:NG.
National Grid Risk Analysis
National Grid disclosed 9 risk factors in its most recent earnings report. National Grid reported the most risks in the "Macro & Political" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
National Grid Peers Comparison
Overall Rating
UnderperformOutperform
Sector (66)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
72 Outperform | £51.35B | 16.79 | 8.35% | 4.51% | -7.42% | 5.84% | |
69 Neutral | 18.36B | 15.41 | 9.86% | 3.85% | -3.11% | -31.10% | |
61 Neutral | 7.74B | 29.24 | 13.24% | 4.57% | 10.04% | 0.00% | |
60 Neutral | 7.64B | 33.14 | 12.95% | 4.80% | 3.78% | 50.18% | |
52 Neutral | 7.83B | -33.90 | 30.12% | 2.88% | -4.82% | -123.58% | |
66 Neutral | $17.65B | 18.10 | 5.60% | 3.62% | 6.62% | 11.55% |
* Utilities Sector Average
Performance Comparison
GB:NG
National Grid
1,035.00
37.43
3.75%
GB:CNA
Centrica
167.80
53.93
47.36%
GB:SVT
Severn Trent
2,538.00
14.28
0.57%
GB:SSE
SSE
1,667.00
-216.36
-11.49%
GB:NTEA
Northern Electric
129.00
11.78
10.05%
GB:UU
United Utilities
1,135.00
127.21
12.62%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.