Hydro One stock is still a buy, Desjardins says

Desjardins Securities analyst Brent Stadler maintained a “Buy” rating and $58.00 target for Hydro One (Hydro One Stock Quote, Chart, News, Analysts, Financials TSX:H) on August 12, describing it as a “top defensive pick with strong growth outlook” and a “set and forget” investment ahead of the company’s second-quarter results on August 13.

As reported by the Globe and Mail, he said Hydro One’s combination of best-in-class growth, strong long-term visibility, and steady expansion opportunities continues to support paying a premium for the shares.

Hydro One is Ontario’s largest electricity transmission and distribution provider with 1.5 million customers, $36.7-billion in assets, and annual revenues of $8.5-billion.

Stadler raised his Q2 earnings per share forecast by four cents to 53 cents, above the 51-cent consensus, to reflect stronger organic rate base growth and robust peak power demand. He also revised his second-half estimates for seasonality, factoring in the sharing of over-earnings with ratepayers in Q4.

For Q2, he said key watch items include updates on the company’s nine transmission projects, particularly nearer-term work on the $472-million St. Clair and $1.2-billion Waasigan lines, along with potential new projects from Ontario’s integrated energy plan, such as the Greenstone and Bowmanville-to-GTA lines.

The analyst said he will also be looking for signs of incremental transmission opportunities tied to the federal government’s ambition to make Canada an energy superpower, as well as commentary on the OEB’s generic rate filing process and its possible effect on Hydro One’s equity thickness and ROE.

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