Hydro One Limited (TSE:H) came out with its quarterly results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. It was a pretty mixed result, with revenues beating expectations to hit CA$2.5b. Statutory earnings fell 2.4% short of analyst forecasts, reaching CA$0.68 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Following last week's earnings report, Hydro One's nine analysts are forecasting 2028 revenues to be CA$9.90b, approximately in line with the last 12 months. Statutory earnings per share are predicted to increase 2.1% to CA$2.40. Before this earnings report, the analysts had been forecasting revenues of CA$10.0b and earnings per share (EPS) of CA$2.39 in 2028. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
See our latest analysis for Hydro One
The analysts reconfirmed their price target of CA$57.37, showing that the business is executing well and in line with expectations. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Hydro One at CA$63.00 per share, while the most bearish prices it at CA$47.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Hydro One is an easy business to forecast or the the analysts are all using similar assumptions.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Hydro One's revenue growth will slow down substantially, with revenues to the end of 2028 expected to display 0.9% growth on an annualised basis. This is compared to a historical growth rate of 5.6% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 6.9% annually. Factoring in the forecast slowdown in growth, it seems obvious that Hydro One is also expected to grow slower than other industry participants.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Hydro One going out to 2028, and you can see them free on our platform here..
However, before you get too enthused, we've discovered 2 warning signs for Hydro One (1 shouldn't be ignored!) that you should be aware of.
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