BofA keeps Avista stock Underperform post-WUTC order

On Monday, BofA Securities maintained its Underperform rating on Avista Corporation (NYSE:AVA) with a steady price target of $35.00. According to InvestingPro data, the stock currently trades at $36.53, with analysts' targets ranging from $35 to $49. The decision follows a recent ruling by the Washington Utilities and Transportation Commission (WUTC) on Avista's general rate cases for electricity and natural gas.

The WUTC issued a Final Order on December 23, 2024, regarding Avista’s 2024 multi-year electric and natural gas general rate cases. For the electric division, the commission approved a $11.9 million increase for the first rate year and a $68.9 million increase for the second rate year, which is a net increase of $44.4 million after accounting for Colstrip adjustments. These figures fall short of Avista’s original requests of $77.1 million for the first year and $78.1 million for the second year.

In the natural gas segment, the WUTC consented to a $14.2 million hike in the first rate year and a $4.0 million rise in the second, which is slightly below the company's requested $17.3 million and $4.6 million, respectively. Cumulatively, the commission sanctioned 52% of Avista's two-year electric revenue proposal and 83% of its two-year natural gas revenue request.

The order also authorized a 9.8% return on equity (ROE), a rise from the previously authorized 9.4% in 2021, and set a 48.5% equity ratio. In light of the approved revenue increases and the higher authorized ROE, BofA Securities has adjusted its estimates for Avista upward for the years 2025 through 2028.

Despite these adjustments, the firm reiterated its Underperform rating on Avista stock. InvestingPro's comprehensive analysis indicates the stock is currently overvalued, with additional insights available in the Pro Research Report, which provides deep-dive analysis of over 1,400 US stocks.

In other recent news, Avista Corporation has reported significant developments in its financial trajectory and ongoing projects. The Washington Utilities and Transportation Commission (WUTC) approved the company's proposed rate increases, resulting in a rise of $11.9 million in electric base revenues and $14.2 million in natural gas base revenues.

The company also reported an increase in Q3 earnings, with consolidated earnings of $0.23 per diluted share, up from $0.19 from the same period of the previous year. However, Avista has lowered its full-year 2024 earnings guidance due to higher power supply costs and other expenses.

Jefferies, an investment firm, has initiated coverage on Avista with a Hold rating, suggesting potential for return on equity (ROE) improvement. Avista's recent developments include significant investments in renewable energy and infrastructure, such as the completion of the Clearwater Wind Project.

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