On Thursday, Alliant Energy (NASDAQ:LNT)'s stock rating was downgraded by Scotiabank (TSX:BNS) from Sector Outperform to Sector Perform, despite an increase in the price target to $67 from $64. The revision comes amidst concerns over the near-term earnings outlook and the company's recent stock performance.
Alliant Energy, listed on NASDAQ:LNT, has been recognized for its defensive, high-quality utilities and strong regulatory environments. The firm's long-term earnings potential is bolstered by recent data center and economic development achievements.
The analyst at Scotiabank highlighted that while they are optimistic about Alliant Energy's long-term earnings power, the immediate earnings forecast appears lackluster, contributing to the decision to adopt a neutral stance. This outlook is further influenced by Alliant Energy's significant relative price-to-earnings (P/E) premium, which has reached its highest level since mid-2022 after outperforming its peers in recent months.
Despite the downgrade, Scotiabank has raised the price target for Alliant Energy, applying a 15% premium to the sector anchor multiple of 16 times the firm's 2027 earnings per share (EPS) estimate. This adjustment reflects a forward-looking approach, shifting the focus from the 2026 to the 2027 EPS estimate and incorporating a sector-wide roll-forward in valuation.
The firm's confidence in Alliant Energy's risk-adjusted growth outlook remains, with an anticipated EPS growth rate of approximately 6%, which is slightly slower than its peers. The analyst also commended the company for securing two new data center customers at the Big Cedar site in Iowa, which is expected to contribute to further generation and transmission developments.
However, the analyst noted that consensus EPS forecasts for 2025-2027 have declined since the November update, and Alliant Energy has historically had a subpar record for exceeding guidance.
Given the 6% and 14% outperformance of Alliant Energy's shares over the past one and six months, respectively, the analyst suggests taking profits at this time. Despite the downgrade, the new price target indicates a potential 14% upside for the stock.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.