Ameresco Benefits From Inflation Reduction Act, Earnings Momentum Underappreciated: Analyst

Ameresco Inc.’s AMRC growing pipeline, along with ongoing expansion in the size and scope of its projects, will benefit from recent U.S. legislation, according to BofA Securities.

The Analyst: Julien Dumoulin-Smith upgraded the rating for Ameresco from Neutral to Buy, while reducing the price target from $74 to $73.

The Thesis: The Framingham, Massachusetts-based company is among the first beneficiaries of the upward earnings revisions in the 2023-2024 period from the anticipated acceleration in the engineering, procurement, and construction work from the Inflation Reduction Act (IRA), Dumoulin-Smith said in the upgrade note.

The near-term increase potential is unique versus other beneficiaries, “as AMRC revenues are recognized on a percentage-of-completion basis,” he added.

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“Separately, we see some potential for IRA upside at the RNG business, having discussed scenarios in a recent meeting with management, although project qualification still remains under debate/negotiation,” the analyst wrote.

“Renegotiation and/or partnerships from its current form should mean incremental upside for existing projects and those under development,” he added.

AMRC Price Action: Shares of Ameresco had risen by 7.91% to $70.22 at the time of publication Monday.