On Wednesday, BofA Securities adjusted its stance on Evergy (NASDAQ:EVRG), an electric utility operating in Kansas and Missouri, upgrading the stock from Neutral to Buy. The firm also increased the price target to $57.00, up from the previous $51.00. The upgrade comes in response to favorable regulatory developments, particularly the progress of Kansas Legislature House Bill 2527 (HB2527), which supports the financial outlook for Evergy.
The bill, which successfully passed the Kansas House on March 12, includes a Plant in Service Accounting (PISA) mechanism that is expected to be beneficial for Evergy. The PISA provision aims to reduce regulatory lag, which in turn could lead to higher Return on Equity (ROE) for the company and provide more stability and visibility for its Earnings Per Share (EPS) growth.
Additionally, Missouri is considering similar draft legislation that would expand and extend PISA, potentially further reducing investment risks associated with Evergy's shares. BofA Securities anticipates that these legislative actions will underpin a 6% or greater EPS growth for Evergy from 2023 to 2028.
The analyst at BofA Securities highlighted the double support provided by the proposed PISA mechanism in the Kansas bill for Evergy. The mechanism is designed to facilitate timely recovery of investments in utility infrastructure, which is crucial for maintaining the company's financial health and growth prospects.
The developments in both Kansas and Missouri are significant for investors, as they could lead to a more favorable regulatory environment for Evergy. This, in turn, is expected to contribute positively to the company's financial performance and provide a more predictable earnings trajectory over the next several years.
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