Breaking Down IDACORP, Inc. (IDA) Financial Health: Key Insights for Investors

Understanding IDACORP, Inc. (IDA) Revenue Streams

Understanding IDACORP, Inc.’s Revenue Streams

The primary source of revenue for IDACORP, Inc. is derived from its utility operations, specifically through Idaho Power, which provides electric utility services. Below is a detailed analysis of the revenue streams, including a breakdown by customer sectors, historical growth rates, and contributions from various segments.

Breakdown of Primary Revenue Sources

As of the third quarter of 2024, the breakdown of retail revenues by customer type is as follows:

Year-over-Year Revenue Growth Rate

In the third quarter of 2024, IDACORP reported a revenue increase of 5.5% compared to the same quarter in 2023. For the year-to-date period, the revenue growth was approximately 7.6% year-over-year.

Contribution of Different Business Segments to Overall Revenue

For the nine months ended September 30, 2024, the contributions to overall revenue from utility operations were as follows:

Analysis of Significant Changes in Revenue Streams

Key factors influencing revenue changes in 2024 include:

• Increased retail rates effective January 1, 2024, contributing approximately $44 million to operating income.
• Customer growth, adding $17.1 million in operating income compared to the previous year.
• Decreased transmission wheeling-related revenues, which fell by $3 million due to regulatory changes.

Overall, the adjustments in rates and customer growth have positively impacted the revenue streams for IDACORP, while changes in regulatory mechanisms have moderated some segments of revenue.

A Deep Dive into IDACORP, Inc. (IDA) Profitability

Profitability Metrics

Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was approximately 81.2%, compared to 81.4% for the same period in 2023.

Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was 20.0%, showing an increase from 19.5% in the previous year.

Net Profit Margin: The net profit margin increased to 17.6% for the nine months ended September 30, 2024, from 17.0% in the same period of 2023.

Trends in Profitability Over Time

The following table summarizes the net income and profit margins over the last two years:

Comparison of Profitability Ratios with Industry Averages

The average profitability ratios for the electric utility industry in 2024 are as follows:

• Gross Profit Margin: 80%
• Operating Profit Margin: 18%
• Net Profit Margin: 15%

Comparing these with the company's metrics, it shows a stronger performance in all aspects:

• Gross Profit Margin: 81.2% vs. 80%
• Operating Profit Margin: 20.0% vs. 18%
• Net Profit Margin: 17.6% vs. 15%

Analysis of Operational Efficiency

Operational efficiency is reflected in the cost management metrics:

• Total Operating Expenses: For the nine months ended September 30, 2024, total operating expenses were $1,141,927,000, compared to $1,077,718,000 for the same period in 2023.
• Cost Management: The increase in operating income was attributed to a $44 million increase in retail revenues per MWh for the first nine months of 2024.
• Gross Margin Trends: The gross margin maintained stability with slight variations, attributed to changes in power supply costs and operational efficiencies.

Overall, the company’s profitability metrics show a solid performance compared to industry averages, with consistent trends of growth in net income and margins.

Debt vs. Equity: How IDACORP, Inc. (IDA) Finances Its Growth

Debt vs. Equity: How IDACORP, Inc. Finances Its Growth

Long-Term Debt: As of September 30, 2024, IDACORP's long-term debt stood at $3,053.9 million, a significant increase from $2,775.8 million at the end of 2023. In August 2024, Idaho Power issued $300 million in first mortgage bonds with a coupon rate of 5.20%, maturing on August 15, 2034. The company has the authority to issue up to $1.2 billion in aggregate principal amount of debt securities through December 31, 2026.

Short-Term Debt: IDACORP had a revolving credit facility of $100 million as of September 30, 2024. There was no commercial paper outstanding during this period.

Debt-to-Equity Ratio: The debt-to-equity ratio as of September 30, 2024, was approximately 0.93, calculated from total debt of $3,053.9 million and total equity of $3,277.6 million. This ratio is lower than the industry average of approximately 1.2, indicating a more conservative approach to leverage.

Recent Debt Issuances: In the first nine months of 2024, IDACORP issued $300 million in long-term debt. The interest expense on long-term debt for this period was $102.0 million, compared to $82.9 million in the previous year.

Credit Ratings: IDACORP maintains a credit rating of Baa1 from Moody's and BBB+ from S&P, indicating a stable outlook for the company's debt.

Balance Between Debt Financing and Equity Funding: For the nine months ended September 30, 2024, IDACORP's financing cash inflows totaled $399 million, with significant contributions from long-term debt issuance and common stock. The company issued 2.65 million shares of common stock during this period.

Assessing IDACORP, Inc. (IDA) Liquidity

Assessing IDACORP's Liquidity

Current Ratio: As of September 30, 2024, IDACORP's current ratio is 1.70, indicating that the company has sufficient current assets to cover its current liabilities.

Quick Ratio: The quick ratio stands at 1.25, suggesting that IDACORP can meet its short-term obligations without relying on inventory sales.

Analysis of Working Capital Trends

For the nine months ended September 30, 2024, IDACORP reported working capital of $427.2 million, an increase from $370.5 million in the previous year. This positive trend reflects improved operational efficiency and cash management.

Cash Flow Statements Overview

Operating Cash Flows: For the nine months ended September 30, 2024, IDACORP generated operating cash flows of $458 million, a significant increase from $162 million in the same period of 2023.

Investing Cash Flows: The net cash used in investing activities was $(756.4 million) for the nine months ended September 30, 2024, reflecting substantial capital expenditures aimed at utility infrastructure improvements.

Financing Cash Flows: Financing activities resulted in net cash inflows of $399 million for the nine months ended September 30, 2024, down from $518 million in the prior year.

Potential Liquidity Concerns or Strengths

IDACORP's liquidity position is bolstered by its access to a $100 million revolving credit facility and $300 million in commercial paper capacity as of September 30, 2024. The company had no outstanding commercial paper during this period, indicating strong cash management and liquidity planning.

However, the increase in capital expenditures and the corresponding cash outflow from investing activities could pose future liquidity challenges if not managed effectively. The company must continue to balance its investment needs with maintaining adequate liquidity levels.

Is IDACORP, Inc. (IDA) Overvalued or Undervalued?

Valuation Analysis

When assessing the financial health of a company, valuation ratios provide critical insights into whether a stock is overvalued or undervalued. For IDACORP, Inc. (IDA), key ratios such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) are fundamental to this analysis.

Price-to-Earnings (P/E) Ratio

The P/E ratio is a vital indicator of a company's valuation relative to its earnings. As of October 2024, IDACORP's P/E ratio stands at 20.5, indicating how much investors are willing to pay per dollar of earnings. This is comparable to the industry average P/E of 18.0, suggesting that IDACORP may be slightly overvalued in relation to its peers.

Price-to-Book (P/B) Ratio

The P/B ratio offers insights into how the market values the company relative to its book value. IDACORP's P/B ratio is currently 1.8, while the industry average is 1.5. This higher ratio indicates that investors are paying a premium for each dollar of net assets, which may suggest overvaluation.

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The EV/EBITDA ratio provides a measure of a company's overall valuation relative to its earnings before interest, taxes, depreciation, and amortization. IDACORP's EV/EBITDA ratio is 12.3, which is above the industry average of 10.7. This higher multiple reflects a potential overvaluation compared to its peers.

Stock Price Trends

Over the past 12 months, IDACORP's stock price has shown a steady upward trend. The stock price increased from $82.50 a year ago to approximately $90.00 as of October 2024. This represents a growth of 9.1%, reflecting investor confidence despite valuation concerns.

Dividend Yield and Payout Ratios

As of October 2024, IDACORP has a dividend yield of 4.0%, with a dividend payout ratio of 57%. This relatively high yield is attractive for income-focused investors, but the payout ratio indicates a significant portion of earnings is being returned to shareholders, potentially limiting growth reinvestment.

Analyst Consensus on Stock Valuation

Analyst consensus on IDACORP's stock is largely neutral, with a majority rating it as a hold. According to recent reports, approximately 60% of analysts recommend holding the stock, while 30% suggest buying and 10% recommend selling. This consensus reflects mixed sentiments regarding the company's valuation relative to its growth prospects.

Key Risks Facing IDACORP, Inc. (IDA)

Key Risks Facing IDACORP, Inc.

Overview of Internal and External Risks

IDACORP, Inc. faces a range of internal and external risks that could impact its financial health. Key risks include:

• Regulatory Risks: The company is subject to decisions made by the Idaho Public Utilities Commission (IPUC), Oregon Public Utilities Commission (OPUC), and the Federal Energy Regulatory Commission (FERC) regarding rate approvals and operational regulations.
• Market Conditions: Economic downturns can affect customer demand and energy prices, leading to reduced revenues.
• Competition: Increased competition from alternative energy sources and other utility providers can impact market share and pricing strategies.

Operational, Financial, or Strategic Risks

Recent earnings reports highlight several operational and financial risks:

• Increased costs associated with mandated purchases of renewable energy sources.
• Risks related to the aging infrastructure, necessitating significant capital expenditures.
• Potential impacts from severe weather events which can disrupt operations.

Mitigation Strategies

To address these risks, IDACORP has implemented several strategies:

• Regulatory Engagement: Active engagement with regulatory bodies to ensure favorable rate decisions.
• Infrastructure Investments: Planned capital expenditures in the range of $5.4 billion to $6.1 billion from 2024 to 2028 to modernize infrastructure and meet growing demand.
• Energy Diversification: Investments in renewable energy projects to diversify energy sources and reduce dependency on traditional fossil fuels.

Financial Performance Highlights

As of September 30, 2024, IDACORP reported:

• Net income attributable to IDACORP, Inc. of $251.3 million.
• Earnings per diluted share of $4.82.
• Total operating revenues of $1.428 billion.

Debt and Equity Structure

As of September 30, 2024, IDACORP maintained a capital structure of:

Long-term debt stood at $3.1 billion with a fair value of approximately $3.0 billion as of the same date.

Future Growth Prospects for IDACORP, Inc. (IDA)

Future Growth Prospects for IDACORP, Inc.

Analysis of Key Growth Drivers

The growth prospects for IDACORP, Inc. are bolstered by several key drivers:

• Product Innovations: The company has invested in renewable energy projects, including solar and wind, which are expected to enhance its energy portfolio and reduce operational costs.
• Market Expansions: IDACORP is exploring opportunities to expand its service territory, particularly in underserved areas, which could significantly increase its customer base.
• Acquisitions: Strategic acquisitions of smaller utility companies could provide immediate revenue boosts and operational synergies.

Future Revenue Growth Projections and Earnings Estimates

Analysts project that IDACORP's revenues will grow at a compound annual growth rate (CAGR) of approximately 5% over the next five years. This growth is largely attributed to:

• Increased retail electric revenues, projected to reach $1.5 billion by 2026, up from $1.4 billion in 2024.
• Net income attributable to IDACORP is expected to rise to $300 million in 2026, reflecting a steady increase from $251 million in 2024.

Strategic Initiatives or Partnerships That May Drive Future Growth

IDACORP has initiated several strategic partnerships aimed at enhancing its growth trajectory:

• Renewable Energy Partnerships: Collaborations with solar and wind energy firms are projected to add 500 MW of renewable capacity by 2026.
• Technology Investments: Investments in smart grid technology are expected to improve operational efficiency and customer service, contributing to revenue growth.

Competitive Advantages That Position the Company for Growth

IDACORP possesses several competitive advantages, including:

• Regulatory Support: The company benefits from favorable regulatory frameworks that allow for timely cost recovery and rate adjustments.
• Strong Financial Position: As of September 30, 2024, IDACORP reported total assets of $9.1 billion and total equity of $3.3 billion, providing a solid foundation for future investments.
• Customer Growth: An increase of approximately 16,500 customers or 2.6% year-over-year enhances revenue stability and growth potential.

Article updated on 8 Nov 2024

Resources:

• IDACORP, Inc. (IDA) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of IDACORP, Inc. (IDA)' financial performance, including balance sheets, income statements, and cash flow statements.
• SEC Filings – View IDACORP, Inc. (IDA)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.