This analyst loves Hydro One

Desjardins Securities analyst Brent Stadler maintained his “Buy” rating and $61.00 target on Hydro One (Hydro One Stock Quote, Chart, News, Analysts, Financials TSX:H), expecting solid third-quarter results supported by rate base growth and favourable weather.

In an Oct. 27 preview, Stadler said higher operating expenses could offset those benefits, prompting him to modestly reduce his earnings forecasts through 2027. The average analyst target is $57.10. Stadler expects Hydro One to report Q3 earnings of $0.70 per share, unchanged from a year earlier and slightly above the Street’s $0.69 estimate.

The analyst attributed the relatively flat earnings outlook to higher operating, maintenance and administration expenses, partially offset by rate base growth and modestly stronger peak electricity demand.

“With 3Q results, we will be looking for additional colour on the JRAP28 filing, an update on H’s 15–transmission line growth pipeline and a general growth update in Ontario,” Stadler said.

A central focus will be Hydro One’s recent regulatory filing, which includes a proposed $27-billion core investment program and a request to increase its regulated equity component to 45%. Stadler said the higher equity allowance would bring Hydro One more in line with North American utilities and help finance Ontario’s growing electricity infrastructure needs.

He estimates Hydro One could achieve annual rate base growth of 12% to 13% during the regulatory period, or 10% to 10.5% net of its financing structure. However, he cautioned that approval of the proposed 45% equity component is not part of his base-case forecast.

Stadler expects a decision from the Ontario Energy Board around mid-2027, potentially followed by a Hydro One investor day. He will also be looking for construction updates on the St. Clair and Waasigan transmission lines, which represent a combined $1.6-billion investment and are expected to enter service in late 2027.

Hydro One is expected to recognize their full earnings contribution until First Nations partners acquire ownership interests, likely six to 12 months after the lines enter service.

Beyond those projects, Stadler expects updates on 13 additional transmission lines scheduled for completion through 2032, along with confirmation of planned capital spending of $8.6-billion in 2026 and 2027.

The analyst also highlighted growing electricity demand from mining in northern Ontario, agriculture in the south and expanding manufacturing activity.

Despite his modest earnings estimate reductions, Stadler remains positive on the utility’s long-term outlook. “H is a high-quality defensive play, with best-in-class balance sheet and growth,” he said.

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