National Grid share price is stuck in a range: wait before you buy

National Grid (LON: NG) share price reacted mildly to the company’s financial results. The stock was trading at 976p on Thursday, where it has been in the past few days. It has risen by 6% from its lowest level this year and slipped by over 15% from its highest level this year.

National Grid earnings

National Grid is a big utility company with operations in the UK and in the US. Its operations are in electricity distribution, transmission, and electricity systems operations. Its US operations are mainly in New York and Massachusetts.

In a statement, National Grid said that its operating profit dropped by 11% in the six months to September 2022. It dropped to £1.98 billion. Its profit before tax dropped by 11% to £1.3 billion while its dividend per share rose by 9% to 19.40p.

National Grid also updated its forward guidance. It expects its cumulative capital investments to about £42 billion. Its asset growth is expected to grow by between 8% and 10%, helped by its strong balance sheet.

National Grid is also investing in clean energy. On Wednesday, it announced that it would fast-track connections for 19 battery storage projects that will generate 20 GW in clean energy.

The key challenge for National Grid is that its business is highly regulated. For one, in the UK, the government has announced a capital allowance regime that could hit its earnings growth in the year to March 2024.

The other key challenge for National Grid is the high-interest rate regime. In the UK, interest rates have risen to 5.25% while government bonds are yielding 4.50%. Therefore, many investors are shifting their capital from stocks to short-term money market funds.

National Grid might be a good investment for income-focused investors. It has a dividend yield of about 6.1%, which is higher than what money market funds are yielding. More so, there is a likelihood that the Bank of England (BoE) will cut interest rates in 2023.

NG chart by TradingView

The daily chart shows that the NG stock price has moved sideways in the past few weeks. It has formed a symmetrical triangle pattern, which is shown in red. The stock is also consolidating at the 50-day and 100-day Exponential Moving Averages.

It is consolidating at the 50% Fibonacci Retracement level while the Average Directional Index (ADX) has crashed to the lowest point since March 29th. This is an indication that the stock has no trend for now.

Therefore, the outlook for the shares is neutral for now until the triangle pattern nears its confluence level. This means that it will remain between the key support at 950p and 1,000p.