Black Hills Earnings Call Highlights Growth Amid Risks

Black Hills ((BKH)) has held its Q4 earnings call. Read on for the main highlights of the call.

Black Hills’ latest earnings call struck a cautiously upbeat tone, with management emphasizing steady earnings growth, disciplined balance sheet management, and tangible progress on major projects. Investors also heard repeated reminders that the company’s growing data center opportunity and pending merger could add meaningful upside, but both are still wrapped in execution and regulatory risk.

EPS Growth Steady Despite Cost Pressures

Black Hills reported 2025 GAAP EPS of $3.98 and adjusted EPS of $4.10, up 5% from 2024 once merger expenses are stripped out. The company leaned on this result as proof it can grow the bottom line even while digesting higher operating costs, elevated interest expense, and the early financial drag from new capital investments.

Constructive 2026 Guidance Signals Confidence

Management introduced 2026 adjusted EPS guidance of $4.25 to $4.45, implying about 6% growth at the midpoint over 2025. They reiterated an expectation to land in the upper half of the long‑term 4%–6% EPS growth range, suggesting confidence that recent rate outcomes and planned investments will translate into sustained earnings momentum.

Data Center Pipeline Emerges as Growth Engine

A rapidly expanding data center pipeline has become a central part of the Black Hills growth story, now exceeding 3 GW of potential load. The company expects around 600 MW from signed hyperscale customers such as Microsoft and Meta by 2030 and believes data centers could generate more than 10% of consolidated EPS beginning in 2028 under current assumptions.

Major Projects Drive Reliability and Future Earnings

On the infrastructure front, Black Hills highlighted the on‑time completion of the 260‑mile Ready Wyoming transmission project, which it called transformational for reliability and market access. The utility also broke ground on Lange II, a 99 MW generation project scheduled to come online in the fourth quarter of 2026, adding another regulated investment to the rate base.

Regulatory Wins Add Revenue and Stability

The company completed three rate reviews in 2025 that together delivered more than $52 million in new annual revenue. It also secured deferred‑accounting trackers and launched a weather‑normalization pilot, steps that should reduce earnings volatility and help align cost recovery more closely with actual spending and weather conditions.

Balance Sheet Strength and Ample Liquidity

Black Hills stressed that it remains committed to investment‑grade credit metrics, targeting about 55% net debt to total capitalization and FFO‑to‑debt of 14%–15%. During the year it issued $450 million of notes at 4.55% and finished with more than $700 million available on its revolving credit facilities, giving it flexibility to fund its capital program.

Capital Plan Supports Growth and Dividends

The utility reaffirmed a $4.7 billion five‑year capital plan, including $900 million deployed in 2025 to support transmission, generation, and other infrastructure investments. Management also underscored its income‑oriented appeal by extending its dividend‑increase streak to 56 consecutive years while targeting a payout ratio of 55%–65% of earnings.

Rising O&M and Financing Costs Weigh on Margins

Operating and maintenance expenses rose by $0.36 per share, including $0.12 of merger‑related costs, with underlying O&M up $0.24 per share. The increase was driven mainly by higher employee and outside‑service costs, insurance premiums, and unplanned outages, while financing costs climbed another $0.33 per share on higher interest expense and share dilution.

Merger Costs and Equity Issuance Add Dilution

Black Hills booked $0.12 per share in merger‑related transaction costs during 2025 and issued $220 million of equity, both of which diluted near‑term EPS. Management guided to a much smaller equity need of $50 million to $70 million in 2026, signaling that the heaviest phase of external equity funding may be behind it if conditions remain stable.

Depreciation Rise Reflects Investment Wave

Depreciation expense increased by $0.15 per share, pressured by new projects and assets moving into service. While this weighs on current earnings, the company framed it as a natural consequence of a growing rate base that should support future returns as these assets earn regulated recovery over time.

Weather Remains a Notable Swing Factor

Weather provided a $0.09 EPS benefit versus 2024 but still represented an $0.11 drag compared with normal conditions, underscoring the inherent volatility in utility earnings tied to temperature swings. Management pointed to its new weather‑normalization pilot as an important tool to smooth these fluctuations going forward.

Data Center Upside Still Faces Execution Risk

Despite the large data center pipeline, management cautioned that a number of major prospective projects remain under negotiation and are not yet finalized. Potential opportunities linked to large computing loads and associated generation or fuel‑supply structures are promising but not guaranteed, leaving material uncertainty around timing and scale of this growth vector.

Merger and Rate Filings Bring Regulatory Risk

The planned merger with NorthWestern Energy is now in regulatory discovery across several states, and outcomes on timing and conditions remain uncertain. Additional risk comes from pending rate reviews, including a long‑overdue South Dakota electric filing and an Arkansas gas request, which could affect how quickly the company recovers costs and how customers experience rate changes.

Guidance Anchored by Capital Plan and Earnings Drivers

Looking ahead, Black Hills’ 2026 EPS guidance of $4.25–$4.45 rests on its $4.7 billion five‑year capital plan, modest equity needs, and the maintenance of strong credit metrics above downgrade thresholds. Management cited new rate recovery, data center contributions, and improving cost alignment as the primary levers expected to support mid‑single‑digit earnings growth and continued dividend expansion.

Black Hills’ earnings call painted the picture of a utility steadily growing earnings while building a platform for potentially faster upside from data centers and a larger combined footprint. Investors will now watch how the company navigates regulatory approvals, manages rising costs, and converts its project pipeline into signed contracts to determine whether today’s optimism translates into durable shareholder returns.