Algonquin Power & Utilities Corp T.AQN

RBC's initial take

[bmbruce]

Sentiment: negative

"We believe the weaker-than-expected Q3/22 results, reduction in 2022 guidance, and comments that the challenging macroeconomic environment would impact its long-term targets, will have a negative impact on the shares of Algonquin. On the conference call (Friday, November 11, at 8:00 AM ET), we expect investors to focus on the company's interest rate exposure (current and future), details on additional headwinds impacting the business, the pending acquisition of Kentucky Power (set to close in January 2023), the renewable development pipeline, and details on the inaugural asset recycling transaction announced in October 2022.

Details

Weak Q3/22 results. Algonquin's Q3/22 Adjusted EPS of $0.11 was well below our estimate of $0.16 and consensus of $0.17. From an EBITDA perspective, the Q3/22 Adjusted EBITDA of $276 million was also below our estimate of $297 million and consensus of $312 million. Management indicated that the quarter was negatively impacted by year-over-year higher interest expense of $23.3 million as a result of borrowings to support growth at higher interest rates and lower recognition of investment tax credits and production tax credits.

Reducing 2022 Adjusted EPS guidance. The company reduced its 2022 Adjusted EPS guidance to $0.66-0.69 (from $0.72-0.77). Management flagged higher interest rates and inflation, delays in construction and completion of certain renewable energy projects, and anticipated delays in connection with certain rate decisions. The updated guidance implies a Q4/22 Adjusted EPS of $0.18-0.21, which compares to consensus of $0.21.

Likely lowering longer-term targets at its upcoming investor day. Management indicated that due to their expectation that the challenging macro environment will continue into 2023, the company is evaluating its longer-term targets and financial expectations, and will provide further details at its upcoming investor day that they expect to hold in early 2023.

Kentucky Power acquisition expected to close in January 2023. As previously announced, management expects to close the $2.65 billion (including assumption of $1.22 billion in debt) acquisition of Kentucky Power in January 2023, subject to the satisfaction or waiver of certain conditions including approval from the U.S. Federal Energy Regulator Commission."

[retiredcf]

Have held AQN for a long time but punched out at the open this morning. GLTA

[BSdetector2016]

Analysts have been 100% worthless on this one.

[mnztr]

Whoa thank GOD I punched out of 2/3s of my stake at $21 in 2020. still holding the bag for 2000 shares 

[Dibah420]

This co. has not recovered since the winter of the ERCOT disaster when Ted Cruz got caught  can-canning his way back from Cancun.

[Eastbank]

Same here Retiredcf....but cashed out mid October around $15 to stop the pain after long term hold. Just lost faith and no longer gave any credence to analyst recommendations.

[Karl63]

Smart move retiredcf!  I would/should have done the same thing with half of my position had I been astute enough to read the early morning report.   I used to do my own analysis, but got lazy and decided to buy into the analyst dialogue; why research (?), everybody knew that AQN is a darling of Bay Street.  Won't happen again . . .

[MS12345]

Enough of the excuses. At the end of the day, this was a total breakdown on execution and as such people, starting with the CEO need to be fired for creating this disaster.