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On Wednesday, Scotiabank (TSX:BNS) analysts raised the price target for Algonquin Power & Utilities Corp. (NYSE:AQN) to $6.50 from $6.00, maintaining a Sector Perform rating. This adjustment comes after Algonquin Power’s 2025-2027 outlook exceeded expectations, leading to a 16% surge in its shares.
The company’s 2027 earnings per share (EPS) guidance, ranging from $0.42 to $0.46, surpassed previous estimates of $0.41. Management anticipates a strong improvement of approximately 300 basis points in earned returns on equity (ROEs). This improvement is expected to continue as Algonquin Power optimizes costs and files rate cases, with the potential for further ROE enhancements beyond 2027. The company has maintained its dividend payments for 28 consecutive years, currently offering a 4.18% yield. InvestingPro analysis reveals 10+ additional insights about AQN’s financial health and growth prospects.
Additionally, the company’s projected compound annual growth rate (CAGR) for the rate base from 2024 to 2027 is around 5%, exceeding prior expectations. Management has indicated that they do not foresee the need for new equity through 2027 and aim to maintain a BBB credit rating.
Scotiabank’s revised target price is based on an 18x 2027 P/E excluding HLBV, equivalent to a 15x multiple including it. This represents a discount compared to the target multiple of 18.5x for other utilities like EMA-T and FTS-T, reflecting the risks linked to Algonquin Power’s earnings turnaround. The analysts noted that Algonquin Power trades at 17.5x ex. HLBV, compared to small-to-mid cap U.S. electric utilities at a 14.6x 2027 P/E.
In other recent news, Algonquin Power & Utilities Corp. has announced several significant developments. The company recently filed a report with the U.S. Securities and Exchange Commission detailing its efforts to combat forced and child labor within its supply chains, showcasing its commitment to ethical labor practices. On the financial front, RBC Capital analysts raised their price target for Algonquin Power stock to $6.50, while maintaining a Sector Perform rating, following the introduction of the company’s "Back to Basics" strategy, which outlines earnings per share targets through 2027. Meanwhile, National Bank Financial downgraded the stock from Outperform to Sector Perform, maintaining a price target of $6.75, due to assumptions related to capital expenditures and rate case awards. Additionally, Algonquin Power shareholders recently elected a new board of directors and approved several key resolutions, including the reappointment of Ernst & Young LLP as the company’s auditor. These resolutions reflect shareholder confidence in the company’s governance and strategic direction. Lastly, the company has been awarded $770 million in transmission projects under the SPP transmission plan, expected to yield attractive returns. These recent developments highlight Algonquin Power’s ongoing strategic and ethical initiatives.
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