Bank of America Securities analyst Paul Zimbardo CFA reiterated a Hold rating on IdaCorp (IDA – Research Report) today and set a price target of $97.00.
Paul Zimbardo CFA has given his Hold rating due to a combination of factors that balance IdaCorp’s risk and reward profile. The company’s stock is trading at a large premium compared to other utility peers, which is justified by its favorable regulatory characteristics and above-average rate base growth. A significant aspect of IdaCorp’s financial health is its estimated 13% rate base growth from 2023 to 2027, primarily driven by incremental capital expenditures. However, this robust growth is expected to result in only a 5% Earnings Per Share (EPS) Compound Annual Growth Rate (CAGR) due to equity dilution.
Zimbardo also anticipates regular rate cases due to the speedy growth, which will need to be managed to avoid cash regulatory lag. Despite a reduction in the authorized Return on Equity (ROE) from an implied 10% to 9.6%, the strong rate base growth is expected to offset this decrease, leading to an increase in EPS estimates. The company’s potential to earn above the 9.12% ‘floor’ and closer to the 9.6% permitted ROE provides an upside to these estimations. Lastly, Zimbardo believes that IdaCorp’s high earned return potential justifies its premium valuation, but its capacity for positive re-rating is limited, with upside needing to be driven by higher earned ROEs or further incremental capital expenditures.
Zimbardo CFA covers the Utilities sector, focusing on stocks such as Entergy, Constellation Energy Corporation, and Dominion Energy. According to TipRanks, Zimbardo CFA has an average return of 4.5% and a 44.44% success rate on recommended stocks.
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IdaCorp (IDA) Company Description:
IDACORP, Inc. is a holding company, which engages in the generation, transmission, distribution, sale, and purchase of electric energy. The firm owns and operates hydroelectric plants on the Snake River and its tributaries. It operates through the following segments: Utilities Operations and Other. The Utilities Operations segment focuses in the production of electricity. The Others segment comprises of IFS’s investments in affordable housing developments and historic rehabilitation projects, Ida-West’s joint venture investments in small hydropower generation projects. The company was founded in 1915 and is headquartered in Boise, ID.
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