Evergy, MDU Set For Growth But Black Hills Faces EPS Headwinds, Says BofA Analyst

BofA Securities analyst Ross Fowler reinstated coverage on four US utilities in the Great Plains.

The analyst reinstated the Buy rating at Evergy, Inc. EVRG and MDU Resources Group, Inc. MDU.

Meanwhile, Fowler reinstated the Neutral rating on OGE Energy Corp OGE and Underperform rating on Black Hills Corporation BKH.

EVRG: The analyst reinstated Buy rating with a price target at $66. The analyst says that despite trading at a 10% discount compared to peers on a 2026E P/E basis, the improving Kansas regulatory environment, which supports higher rate base growth, appears undervalued.

The analyst estimates FY24, FY25 and FY26E EPS at $3.86, $4.09 and $4.30, respectively, all above consensus.  

Fowler writes that consensus EPS estimates for FY26 and FY27 remain largely unchanged despite the benefits from House Bill 2527.

MDU: The analyst reinstated Buy rating with a price target of $28. Fowler believes the current 15% discount to the electric utility peer group is unjustified, considering MDU’s ongoing transition to a pure-play regulated utility and pipeline operator, along with its projected 6-8% EPS growth rate through the planning period.

Although the company’s multi-jurisdictional presence may lead to some delays in recovery, the analyst expects sustained support for earned ROEs at the electric utility, driven by a strong pipeline of data center customer connections in areas experiencing transmission congestion.

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OGE: The analyst reinstated Neutral rating with a $40 price target. While the analyst values OGE’s execution and growth potential from data center and crypto-mining load, the challenging regulatory environment in Oklahoma and significant capital investments needed for resource adequacy present risks.

Fowler expects EPS estimates of $2.14, $2.28, and $2.43 for FY24, FY25, and FY26, respectively, in line with consensus estimates.

BKH: The analyst reinstated Underperform rating with a $59 price target. The analyst says that BKH’s electric utility operations are poised for growth with rising residential, commercial, and data center load, which currently contributes 5% to EPS and is expected to exceed 10% by 2028.

Fowler expects rate base expansion opportunities in South Dakota and Colorado to support a 7%+ CAGR. However, $1.6 billion in debt maturities from 2023 to 2028, with a 3.03% average interest rate, could create a ~$0.50 EPS headwind, exacerbating risks given BKH’s already low 4-6% target EPS CAGR, adds the analyst.

Fowler anticipates EPS estimates of $3.88, $4.13, and $4.35 for FY24, FY25, and FY26, below the consensus estimates of $3.92, $4.14, and $4.40, respectively.

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