Iberdrola Sets 2023 Guidance in Line With Expectations

We maintain our fair value estimate of EUR 10.60 after no-moat Iberdrola IBE released good 2022 results, albeit slightly shy of FactSet consensus, and set 2023 guidance in line with expectations. The firm will pay a dividend of EUR 0.49 per share on 2022 earnings, 11% higher than the year before and implying a 4.5% yield, in line with the sector average. Shares appear fairly valued. We see more value in peers Engie, EDP, or Enel.

EBITDA grew 10% to EUR 13.2 billion in 2022, but decreased by 4% in the fourth quarter, deteriorating from 13% growth in the third quarter. Positive foreign exchange contributed to 6% of EBITDA growth. Net profit increased by 12% to EUR 4.34 billion, above the EUR 4 billion-EUR 4.2 billion guidance and our EUR 4.15 billion, but below consensus’ EUR 4.45 billion.

The main positive driver was the networks division, which posted 15% EBITDA growth excluding one-offs during the year. In the fourth quarter, networks’ EBITDA growth accelerated to 20% thanks to Spain. Over the year, networks were boosted by tariff indexation to high inflation in Brazil, positive rate cases in the U.S., and growth in the regulated asset base. The energy production and customer division’s EBITDA grew 4% in 2022, but decreased by 15% during the fourth quarter mostly because of a positive one-off in Spain in the year-ago quarter. Over the year, margin squeeze in the U.K. and Spanish supply businesses as well as the drought in Spain were more than offset by additional renewable capacity of 1.8 gigawatts (of which 0.8 GW was in the fourth quarter), short of the 2.5 GW target reflecting supply chain issues and the anticircumvention inquiry in the United States.

Iberdrola guides for mid-single-digit net profit growth in 2023, which points to a net profit of EUR 4.5 billion including the EUR 0.2 billion impact of the extraordinary revenue tax in Spain. Excluding the tax, 2023 net profit would amount to EUR 4.7 billion, in line with our and consensus’ estimate.