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On Wednesday, Hydro One Ltd. (H:CN) (OTC: HRNNF), an Ontario transmission and distribution utility, received a Hold rating from Jefferies, with a price target set at Cdn$46.00. The firm began coverage noting that the stock is currently valued at a 35% premium compared to its industry peers and is considered fully valued with a 1% total shareholder return (TSR).
The utility company, which operates primarily in Ontario, is expected to see its earnings per share (EPS) growth outpace its rate base growth through 2027. This forecast includes long-term upside potential from incremental transmission projects that have been announced but not yet quantified. These projects are expected to contribute to both the rate base and EPS compound annual growth rate (CAGR).
Despite the positive outlook on earnings growth, the market has already priced in this anticipated growth, according to Jefferies. The firm's assessment suggests that the stock's high premium reflects the growth prospects that Hydro One has revealed, including the base capital plan that spans from 2028 to 2032.
The rating indicates Jefferies' neutral stance on Hydro One's stock performance, implying that the firm does not currently see the shares as undervalued or overvalued based on projected growth and market expectations. The Hold rating is a guidance for investors that the stock might not offer significant upside or downside in the near term, according to the firm's analysis.
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