Paul Harris, CFAAlgonquin Power & Utilities CorpAQN.TOWATCHMar 02, 2023

Continues working through a multi-year turnaround. Now mostly a regulated utility providing natural gas, water, and electricity. Positive that management's returned focus to simpler utility operations. New, approved utility rates are helping earnings. More than 80% of operations in US, HQ plans to move to US (reduce taxes, attract more US investors).

Debt remains extremely high, earnings growth still modest. She's just monitoring, needs to see more execution.

Turnaround mode. Continues to be in the penalty box. Looking to redomicile to the US for greater index inclusion and become known to more US investors. Valuation is quite low. Geographically unfocused asset mix. More attractive names in the space. 

They want to be headquartered in the US where 80% of their business is. They cut their dividend twice and is now manageable. She sees little dividend growth. They sold their renewable business. Cut your losses and look for dividend growth elsewhere.

Hasn't run up as much as PPL, so it's a name you can add to.

He owns a preferred share. AQN's problem is the debt from all their acquisitions back in the day; interest rates hit them hard and forced a dividend cut. They sold their renewables business. Then, shares fell after an earnings report that lowered their 2027 profit guidance. AQN now focuses on gas, water and electric services. The street is saying to them, "Prove to me you can make money again." It's sitting in the penalty box waiting for management to show a positive move.

It's one of the weaker utility stocks. The chart is choppy. It has resistance from late-2023 and has a hard time breaking that level, just south of $9. It will likely be rangebound. If you don't mind that, you can just collect the dividend.

There is hope. They are now focused on regulated utilities and are out of renewables, which didn't work out. They're under-earning what they are allowed to make, due to government strictures. The opportunity ahead is for them to increase their profitability both internally and what they're allowed.

Sold most of its renewables business. Coming out of some very dark years. Continues to put $$ in. Attractive looking out 5 years as new management regains footing and builds confidence with investors. Will grind higher. Yield is ~5%.

They've had several problems in recent years, but after selling their renewable business, they are on track to be a regulated utility. They have many US operations. Owns another utility. AQN lowered guidance for tax reasons.

Lots of issues over the years. Still in a big restructuring phase. Better companies to own for dividends. Yield is 4.3%.

Very tough couple of years. Looking better technically. But other names have better growth stories and valuations.

Look at CPX.

They spent a lot to enter the renewables space and overlevered the balance sheet. That was a disaster. They've been cleaning that up to be a pure-play utility, which is a predictable business that investors like. They have completely new leadership and have reset. This offers safe, predictable income. 

Nice beat last quarter. Energy infrastructure is a good theme. Management has righted the ship. Recent upgrade is justified. He's been buying since $6-7. Trades at 13x 2027 earnings (cheaper than peers), modelling ~14% EPS growth. Six analyst upgrades over last 30 days. Nice dividend. 

It could be a takeover target, though she doesn't own it for this reason. It did well last year, up 40%, but lagged its peers. It has a history of two dividend cuts. They've done a good job cleaning up the company by selling their renewables and are keeping hydro assets for now to become a pure-play utility. They are doing the right things. It's a new, different company now. Is the cheapest pure-play utility in Canada now. Is very bullish with utilities given data centres and the move away from fossil fuels.

They've gone through a serious transformation including cutting their dividend. An activist has come in so that the company focuses on AQN's core utility business. It's improving, and doing fine compared to other utilities. The turnaround has been successful.