Black Hills Corp's FY23 a Lost Year - Cost Pressures Have Stalled Growth Rate

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By Sam Boughedda

Black Hills Corp. (NYSE:BKH) has been downgraded to Neutral from Buy, with its price target cut to $66 from $87 per share by BofA analysts.

They said the company's FY23 is a "lost year," and cost pressures have stalled its growth rate.

"We downgrade shares of Black Hills Corp (BKH) to Neutral from Buy due to greater operating and financing expense pressures into 2023 that lingers into future years as well," the analyst stated in a note to clients. "We reduce our 2023E adjusted EPS -3% to $4.15, implying only slight growth from our $4.08 BofA/$4.10 Consensus 2022 EPS. We similarly cut 2024-2025 -3% and are now 2-3% below Consensus and 3-5% below the implied 5-7% EPS guidance off a 2022 base."

BofA now looks for a "wholesome 3Q update on the updated cadence of rate cases arising from the litany of cost pressures."

"The cost pressures could lead to accelerated rate cases and higher rate requests, compounding elevated commodity price pressures. The latest Arkansas equity ratio reduction to 45% from 52% was hardly surprising based on data points for peers but is the latest sign of regulatory responses to affordability questions. We estimate this is -$0.05 headwind that was unlikely fully reflected in LT guidance," explained the analysts.

Black Hills shares are down 2% at the time of writing, despite opening the session higher.