Alliant Energy Earnings: Constructive Regulation Supports Growth

We are maintaining our Alliant Energy LNT $58 per share fair value estimate after the company reported first-quarter earnings per share of $0.65, down from $0.77 in the same year-ago period. Management reaffirmed 2023 EPS guidance of $2.82 to $2.96, in line with our expectations. Our narrow moat and stable moat trend remain unchanged.

Alliant remains among the cheapest U.S. utilities in our coverage universe, albeit trading only 6% below our fair value estimate as of May 5. It is only one of five utilities with a 4-star rating. The stock is up 10% from its March low. We think Alliant’s combination of 3.3% dividend yield, our outlook for 7% earnings growth, and the potential for capital appreciation represent one of the best total return opportunities in the sector.

Similar to Alliant’s peers, the switch from a colder-than-normal winter in 2022 to a substantially warmer-than-normal winter this year resulted in a $0.07 per share negative year-over-year earnings impact. Near-term changes in electricity demand driven by weather volatility have no impact on our fair value estimate.

We think investors are starting to become more comfortable with Alliant’s recently filed rate case in Wisconsin. In late April, Alliant filed a rate case that includes a request to maintain its 10% allowed return on equity with modest revenue increases in 2024-25. A decision is expected later this year. We expect an outcome consistent with WEC Energy Group’s 9.8% allowed ROE regulators approved last year, which we viewed as constructive. Additionally, in March, a new commissioner was appointed to the state regulatory commission who we think will support a constructive regulatory environment.

In April, Iowa regulators approved advanced ratemaking principles for 200 megawatts of solar projects. There had been some concern Alliant would have needed to file a traditional rate case to recover costs of the project.