Fundamental Analysis of IDACORP, Inc. (IDA)
IDACORP, Inc. (NYSE: IDA) is a publicly traded holding company primarily engaged in the electric utility business through its main subsidiary, Idaho Power Company. As a regulated utility, IDACORP's fundamental analysis largely centers on the stability of its service territory, its financial health, regulatory environment, and its ability to invest capital efficiently to meet growing demand.
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| Fundamental Analysis of IDACORP, Inc. (IDA) |
1. Business Overview and Growth Drivers
IDACORP's core business, Idaho Power, provides electric generation, transmission, and distribution services to over 600,000 customers across southern Idaho and eastern Oregon.
Primary Segment and Revenue Model
Utility Operations: This segment, operated by Idaho Power, is the primary source of IDACORP’s revenue. As a regulated utility, Idaho Power operates under a stable business model where rates are set by state public utility commissions (PUCs) to allow for the recovery of costs and a reasonable return on equity (ROE).
All Other: This smaller segment includes investments in affordable housing developments and small hydropower generation projects.
Key Growth Catalysts
IDACORP is positioned in a region experiencing significant economic expansion and population growth, which are the main drivers for its revenue and earnings growth.
Robust Customer Growth: The service territory, particularly Idaho, has seen strong demographic and economic expansion. Customer growth, coupled with increased usage per retail customer, especially in industrial segments (e.g., food processing, high-tech reshoring), directly fuels the need for expanded utility infrastructure and higher sales volumes.
Aggressive Capital Investment Plan: To meet this rising demand and strengthen grid reliability, IDACORP has committed to a substantial multi-year Capital Expenditure (CapEx) plan (e.g., around $5.6 billion over the next five years, significantly higher than previous periods). This investment is directed toward new generation resources (including solar, wind, and battery storage), transmission projects (like the Boardman to Hemingway—B2H—line), and grid modernization.
Rate Base Expansion: In the regulated utility space, CapEx is typically added to the rate base, which is the asset value upon which the company is permitted to earn a regulated return. The increasing CapEx is expected to drive strong rate base growth (e.g., projected compound annual growth rate (CAGR) of around 16% in the rate base), which in turn, under supportive regulatory conditions, should translate into predictable earnings growth.
Clean Energy Transition: The company is pursuing a goal of 100% clean energy by 2045, which necessitates continued investment in renewables (like hydropower, which currently forms a large part of its energy mix, plus new solar and battery projects) and the retirement or conversion of coal-fired units. This environmental commitment is a long-term CapEx driver.
2. Financial Performance and Health
Analyzing IDACORP's financial statements provides insight into the quality of its earnings, operational efficiency, and balance sheet stability.
Key Profitability Metrics
| Metric | Latest Value (Approx.) | Commentary |
| Earnings Per Share (EPS) | ~$5.50 - $5.70 (Trailing 12 months/Forecast 2025) | The company has a strong track record of consistent earnings growth, projecting further increases based on rate base expansion and customer growth. |
| Return on Equity (ROE) | ~7.7% - 9.2% | ROE is an important indicator for utilities as it is regulated. An ROE near the authorized level (e.g., 9.12% cited by analysts) suggests efficient operation within the regulatory framework. |
| Net Margin | ~17% (Trailing 12 months) | A utility's profitability is stable but regulated. The net margin reflects a healthy ability to control costs and manage the regulatory environment. |
Valuation Ratios
Utility stocks are often valued based on stability and yield, making Price-to-Earnings (P/E) and Price-to-Book (P/B) relevant.
| Metric | Latest Value (Approx.) | Commentary |
| P/E Ratio (Normalized) | ~22.85 | This is relatively higher compared to the broader utility industry average, suggesting the market is pricing in the company's strong, accelerated earnings and rate base growth outlook. |
| Price-to-Book (P/B) Ratio | ~2.06 | This is also slightly elevated for a utility, reflecting confidence in the company's asset base and future return on capital. |
| Intrinsic Value | Often cited as being slightly undervalued to fairly valued by various models (e.g., DCF analysis) | While market multiples appear high, some intrinsic value calculations suggest the stock is still reasonably priced given its long-term growth prospects. |
Financial Health and Leverage
A crucial factor for capital-intensive utilities is their balance sheet health, particularly the debt load required to finance CapEx.
Debt-to-Equity (D/E) Ratio: ~101.2% (or 1.08x)
This ratio indicates that the company uses slightly more debt than equity to finance its assets. While the debt level has been increasing to fund the significant CapEx program, this is typical for a utility in a major growth phase.
Interest Coverage Ratio: ~2.0x - 2.86x
This suggests that the company's earnings before interest and taxes (EBIT) only cover its interest payments a few times over. For a utility, this level can indicate financial strain if operating income were to significantly drop, though the regulated nature of its income provides stability. This low coverage is a point of concern.
Liquidity (Current Ratio/Quick Ratio): Current ratio is around 1.45, suggesting that the company has adequate short-term assets to cover its short-term liabilities.
3. Dividend Profile
IDACORP is highly regarded for its commitment to returning value to shareholders through dividends, a common characteristic of mature utility stocks.
Dividend Track Record: The company has a solid record of maintaining dividend payments (over 55 consecutive years) and increasing its dividend for over 13 straight years, signifying financial stability and a focus on dividend growth.
Dividend Yield: The yield is typically in the low to mid-range for the utility sector (e.g., ~2.73%).
Payout Ratio: The company is focused on moving toward the higher end of its target payout ratio (between 60% and 70% of sustainable earnings), which suggests there is room for continued, albeit potentially moderate, dividend increases alongside earnings growth.
4. Regulatory Environment
The regulatory framework is arguably the most critical external factor for a regulated utility.
Supportive Environment: IDACORP generally benefits from a supportive regulatory environment in Idaho, evidenced by the approval of a recent general rate case that resulted in a rate increase for customers.
Rate Cases and Uncertainty: Due to the large CapEx planned and rising financing costs, management may need to file for rate cases more frequently. These filings are necessary to ensure the company can earn its authorized ROE on the expanding rate base. However, rate cases inherently introduce regulatory lag and investor uncertainty until a final decision is reached by the PUC.
Tax Credits: The company benefits from regulatory mechanisms that allow the use of additional tax credits, which positively impacts reported earnings per share.
5. Conclusion and Investment Outlook
IDACORP (IDA) presents a compelling case as a growth utility in a rapidly expanding service territory. The fundamental analysis highlights several strengths and a few areas of caution:
Strengths:
✅ Strong Demand and Customer Growth: The unprecedented expansion in its service area drives predictable, long-term revenue and earnings growth.
✅ Accelerating Capital Plan: Massive CapEx investment directly leads to a significantly higher rate base, which is the engine for future regulated earnings.
✅ Stable Business Model: Regulated utilities offer lower volatility and stable cash flows.
✅ Consistent Dividend Growth: A reliable source of income for investors.
Risks and Concerns:
⚠️ High Valuation Multiples: The stock trades at a premium P/E and P/B relative to its peers, pricing in much of the expected growth.
⚠️ High Leverage: The increasing debt-to-equity and the low interest coverage ratio warrant close monitoring, as the cost of capital can impact future profitability.
⚠️ Regulatory Risk: Frequent rate cases could introduce volatility and are critical to successfully executing the capital plan.
Overall: IDACORP is a differentiated small to mid-cap utility with strong fundamentals driven by accelerating growth. While its valuation is relatively high and its debt profile requires attention, the favorable demographics and aggressive, rate base-expanding CapEx plan make it a strong consideration for investors seeking a utility stock with a robust growth component. Investors should focus on the execution of the capital plan and the outcomes of future rate case filings.
