On Aug 26, we issued an updated research report on IDACORP Inc. (NYSE:IDA) . The company is set to benefit from improving economics in the state of Idaho, a rising customer count and addition of new housing units. However, a stringent regulatory environment, timely completion of projects within budget and regulatory compliance costs could dampen the performance of the company.
IDACORP’s earnings per share in second-quarter beat the Zacks Consensus Estimate by 14.3%. The company’s bottom line benefited from improving economic conditions in its service territories and warmer temperatures, which boosted the demand for utility services.
IDACORP’s regulated electric operations in Idaho generate a relatively stable and growing earnings stream. Ongoing economic growth in its service territories contributed to the expansion in the company’s customer base. In second-quarter 2016, Idaho Power’s customer base grew 1.8%, which resulted in an increase of a $2.7 million in its operating income. In the first half of 2016, customer growth contributed $4.8 million to the company’s operating income.
In addition, rising manufacturing activities in its service territories and the possibility of warmer-than-usual temperatures would have a positive impact drive the demand of utility services. With nearly 48% of the total electricity being generated by hydroelectric units, the company is well poised to meet the state’s emission standards.
On the flip side, IDACORP operates in a strict regulatory environment and its nature of business is subject to complex and comprehensive federal, state and other regulations. The company runs several hydroelectric generation plants, which necessitate relicensing and certain other costs.
The utility also faces the risk of not being able to finish projects within the stipulated time and budget due to a rise in cost of inputs and regulatory compliance costs. Its financial performance thus depends primarily on its ability to manage the operations of its transmission and distribution businesses.
Zacks Rank & Key Picks
IDACORP currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the electric utility space include CMS Energy (NYSE:CMS) , DTE Energy (NYSE:DTE) and NiSource Inc. (NYSE:NI) . All these stocks currently carry a Zacks Rank #2 (Buy).
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