National Bank and RBC Ratings / Target Prices for AQNUpdate: National Bank of Canada Maintains Algonquin's Rating, Price Target; RBC Says Market Will Focus On Kentucky Power Deal 2023-03-20 10:08:26 AM ET (MT Newswires)
10:08 AM EDT, 03/20/2023 (MT Newswires) -- National Bank of Canada maintained Algonquin Power & Utilities Corp. (AQN.TO)'s sector perform rating and US$10.00 price target following the release of the company's results for the fourth quarter of 2022.
Algonquin booked an adjusted EPS of US$0.22, beating the bank's estimate and consensus forecast of US$0.19. Adjusted EBITDA totaled -$358 million compared to the bank's expectation of -$352 million and consensus estimate of $346 million.
National Bank said it remains "on the sidelines pending uncertainty related to AQN's next steps." A new application for the company's Kentucky Power deal was filed with FERC in mid-February although the bank noted that the April 26 deadline is fast approaching.
This may potentially open the door for Algonquin to walk from the deal in exchange for a small break free, National Bank said.
"Should the deal close, AQN's business mix would shift to over 80% regulated, before any renewable asset sell-downs. AQN remains confident in its ability to close $1 billion of sell-downs by year-end," National Bank said.
"As Atlantica Yield entered a strategic review in late February, AQN may look to sell its stake (42%, $1.3 billion), but it could be exploring transactions across its renewable footprint," the bank added.
Meanwhile, RBC Capital Markets expects the market to remain focused on Algonquin's pending Kentucky Power acquisition following the solid results.
"We believe the shares of AQN are currently fairly valued given the near-term uncertainties, but we see the shares moving higher if the Kentucky Power transaction is terminated," RBC said.
RBC gave Algonquin a sector perform rating with a US$8.00 price target.