Stock Analysis: Evergy, Inc. (EVRG) – Q4 2024

Summary

Evergy, Inc. (EVRG), a regulated electric utility serving Kansas and Missouri, reported strong Q4 2024 results with adjusted EPS of $3.81, up from $3.54 in the prior year. The company continues to focus on grid modernization, regulatory execution, and economic development. Evergy reaffirmed its 2025 EPS guidance of $3.92-$4.12, with a midpoint of $4.02, and projects 4%-6% annual EPS growth through 2029.

Investment Potential

• Short-term outlook (2025-2026): Stable revenue growth backed by a $17.5 billion capital plan, expected rate base growth of 8.5% annually, and regulatory stability. The company is investing in new gas and solar generation projects and expects large load additions.
• Long-term outlook (2027 & Beyond): Evergy's economic development pipeline (11 GW of potential load additions) provides strong future growth opportunities. Investments in clean energy and infrastructure modernization further strengthen its competitive positioning.

Recommendation

Moderate Buy / Watchlist

• Short-term: Hold – Strong regulatory execution and demand growth provide stability, but capital expenditures and financing risks warrant caution.
• Long-term: Buy – If Evergy successfully executes on its growth pipeline, it will benefit from increased demand and operational efficiencies.

Financial Highlights

• Revenue (FY 2024): $5.85 billion (+6.2% YoY)
• Net Income: $873.5 million (+19.4% YoY)
• EBITDA: $2.64 billion (+9.3% YoY)
• EPS: $3.79 (up from $3.18 in 2023)
• Dividend Growth: Increased 4% to an annualized $2.67 per share
• Operating Cash Flow: $1.04 billion (-47.5% YoY, due to increased capital investments)
• Capital Expenditure: $1.27 billion (expected to increase further)
• Debt: Total debt decreased to $508.7 million (from $13.2 billion in 2023 due to restructured financing)
• P/E Ratio: 18.34 (fairly valued compared to peers)

Macroeconomic & Industry Factors

🔴 Risks & Challenges

• Regulatory Uncertainty: Rate case proceedings in Kansas and Missouri could impact revenue recognition and capital recovery.
• Capital-Intensive Growth: $17.5 billion CapEx plan requires prudent financing; equity issuance of $2.8 billion projected from 2026-2029.
• Interest Rate Sensitivity: Rising interest rates could impact debt financing and cost of capital.
• Weather-Driven Demand Variability: Mild weather impacted revenue in 2024; continued unpredictability could pose a risk.

🟢 Growth Drivers

• Strong Economic Development Pipeline: 11 GW of prospective demand, with 2.4 GW in advanced negotiations.
• Renewable & Dispatchable Energy Expansion: New investments in natural gas and solar will support reliability and cost competitiveness.
• Rate Base Growth: Expected 8.5% CAGR through 2029, with regulatory support for infrastructure investments.
• Strategic Partnerships: Google, Meta, and Panasonic expansions will drive demand growth from 2027 onwards.

⚠️ Short-Term Verdict (2025-2026)

Hold / Speculative Buy

• Stable near-term earnings but execution risk in capital investments.
• Waiting on clarity from regulatory proceedings and capital market activity.

✅ Long-Term Verdict (2027 & Beyond)

Strong Buy

• Structural tailwinds from economic development and infrastructure investments.
• Favorable growth trends in electricity demand from data centers and industrial customers.

Valuation & Intrinsic Value Analysis

Key Ratios (FY 2024)

• P/E Ratio: 18.34 (fairly valued in the utilities sector)
• Dividend Yield: ~3.8% (stable payout, aligned with sector peers)
• Debt-to-Equity Ratio: 0.052 (significant reduction due to debt restructuring)
• FCF Yield: Negative (-$234.6M FCF) due to high CapEx, expected to improve post-2027.

DCF-Based Intrinsic Value

• Projected Growth Rate: 4-6% CAGR
• Discount Rate (WACC): ~8%
• Terminal Growth Rate: 2.5%
• Estimated Intrinsic Value: $72-$78 per share
• Market Price: $69.52 (as of latest data)
• Conclusion: Fairly valued, with potential upside from growth execution.

Final Investment Assessment

📌 Short-Term (2025-2026): ⚠️ Hold / Speculative Buy
📌 Long-Term (2027+): ✅ Strong Buy

Evergy presents a solid long-term investment opportunity driven by regulatory stability, economic development, and clean energy expansion. However, short-term risks related to financing and capital expenditures warrant a cautious approach before making large allocations.

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Disclaimer

This analysis is for informational purposes only and not financial advice. Conduct independent research before investing.