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On Monday, Jefferies analyst Julien Dumoulin-Smith adjusted the price target for Hydro One Ltd. (TSX:H) (OTC: HRNNF) to Cdn$45.00, a slight decrease from the previous Cdn$46.00, while maintaining a Hold rating on the stock. The revision comes as the analyst anticipates a fiscal year 2024 (FY24) result of $1.91 per share for the company, with a slight increase in estimates.
Dumoulin-Smith highlighted a roughly 5% year-over-year decline in peak demand for the quarter. This reduction in demand poses a potential earnings impact for Hydro One, given the company's sensitivity to changes in peak demand. According to the analyst, a 1,000 MW shift in peak demand could translate to approximately a $0.01/share change in earnings, indicating a weather-related earnings headwind of about $0.02-$0.03 per share.
Despite the challenges posed by the dip in demand, the analyst believes that other factors will help balance the company's financial performance. Specifically, rate increases and continued productivity savings are expected to offset the negative effects of the lower peak demand.
The analyst's report suggests that Hydro One's financial outlook remains generally in line with expectations. While acknowledging the current situation, Dumoulin-Smith also noted that it is too early for any meaningful updates regarding the company's financial trajectory. The hold rating indicates a neutral stance on Hydro One's shares, with the new price target reflecting a modest adjustment based on the recent developments and forecasts.
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