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Hydro One Limited (TSE:H)
TSX:H

Hydro One (H) AI Stock Analysis

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Hydro One

(TSX:H)

Rating:67Neutral
Price Target:
C$54.00
▲(10.05%Upside)
Hydro One's strong earnings growth and positive corporate developments are significant strengths, offset by technical indicators showing bearish trends and valuation concerns due to a high P/E ratio. The company's strategic initiatives and stable dividend provide a balanced outlook.
Positive Factors
Earnings Growth
Hydro One's EPS growth is expected to continue outpacing its rate base through 2027.
Financial Strategy
Newly appointed CFRO Harry Taylor reaffirmed the 5-7% EPS guidance through 2027, that no equity is required during that timeframe, and that the financial strategy will be unchanged.
Long-term Investment
Positive on the shares long term given the visible long-dated capex program, high-quality asset base, and strong balance sheet.
Negative Factors
Market Performance
The significant share outperformance vs. S&P/TSX Utilities Index, the premium P/E valuation of 21x, and the relative return to the unchanged $42 target drive the rating to Market Perform from Outperform.
Regulatory Uncertainty
There is uncertainty around the outcome of Hydro One's cost of capital review with the OEB, which could alter its ROE/equity layer.
Valuation
Hydro One shares are currently trading at a 35% premium to peers and are fully valued.

Hydro One (H) vs. iShares MSCI Canada ETF (EWC)

Hydro One Business Overview & Revenue Model

Company DescriptionHydro One Limited is a leading electricity transmission and distribution service provider in Ontario, Canada. The company operates in the utilities sector, primarily focusing on delivering electricity safely and reliably to homes and businesses. Hydro One owns and operates an extensive network of transmission lines and distribution systems, which are critical to the electricity infrastructure in Ontario.
How the Company Makes MoneyHydro One makes money primarily through the transmission and distribution of electricity. The company generates revenue by charging regulated rates to customers for the delivery of electricity. These rates are overseen and approved by the Ontario Energy Board (OEB) to ensure fair pricing. Hydro One's revenue streams are largely stable and predictable due to the regulatory environment, which allows for cost recovery and a return on equity. Additionally, the company may engage in partnerships or agreements with other utilities or energy providers to enhance its service offerings and operational efficiency. However, its core income is derived from the regulated transmission and distribution services it provides.

Hydro One Earnings Call Summary

Earnings Call Date:May 08, 2025
(Q1-2025)
|
% Change Since: -8.25%|
Next Earnings Date:Aug 12, 2025
Earnings Call Sentiment Neutral
Hydro One demonstrated strong financial performance with significant revenue growth and strategic acquisitions. However, challenges such as storm damage costs and tariff-related uncertainties pose potential risks. The company is actively managing these through strategic initiatives and regulatory applications.
Q1-2025 Updates
Positive Updates
Increased Earnings Per Share
Hydro One reported an EPS of $0.60 for Q1 2025, up from $0.49 in Q1 2024, driven by higher revenues and demand.
Revenue Growth
Revenues net of purchased power increased by 11% year-over-year, with transmission revenues up by 15% and distribution revenues up by 6.3%.
Significant Investments in Infrastructure
The company placed $423 million of assets in service during Q1 2025, a 76.3% increase compared to the prior year.
Successful Acquisition
Completed the acquisition of a 48% interest in the East-West Tie Transmission Line, immediately accretive to earnings.
Safety and Sustainability Recognitions
Received the Public Electrical Safety Excellence Award and the Sustainability Excellence Award for sustainable financing initiatives.
Tentative Agreement with Power Workers' Union
Reached tentative agreements covering frontline and customer-facing roles, ensuring stability in labor relations.
Negative Updates
Significant Storm Damage Costs
The intergenerational ice storm caused substantial damage, leading to significant cost implications and a need for Z-factor recovery.
Uncertainty Due to Tariffs
The evolving tariff situation creates uncertainty and potential cost increases, impacting supply chain and procurement strategies.
Higher Operating Expenses
Operating, maintenance, and administration expenses increased by 3.1%, with transmission segment costs up by 6.6%.
Increased Interest and Tax Expenses
Interest expenses rose by 10.1% due to higher debt, and income tax expenses increased due to higher pretax earnings.
Company Guidance
During Hydro One Limited's First Quarter 2025 Analyst Teleconference, the company provided guidance on several key metrics. Hydro One reported a basic earnings per share of $0.60, an increase from $0.49 in the same quarter of the previous year. This growth was attributed to higher revenues net of purchased power, which rose by 11% year-over-year, driven by higher 2025 approved OEB rates and increased average monthly transmission peak demand. The company also highlighted a significant increase in assets placed in service, totaling $423 million, up 76.3% from the previous year. Additionally, Hydro One noted a 9.2% increase in capital expenditures, reaching $735 million, with investments in both transmission and distribution segments. The guidance also mentioned the impact of the severe ice storm on costs and the intention to apply for cost recovery through a Z-factor application with the Ontario Energy Board. Hydro One reiterated its expectation for earnings per share growth between 6% and 8% annually through 2027, based on a 2022 normalized base of $1.61. The company also declared a quarterly dividend of $0.3331 per share.

Hydro One Financial Statement Overview

Summary
Hydro One shows solid financial health with consistent revenue growth and strong profitability margins. The balance sheet is stable, although somewhat leveraged, and cash flow generation is strong but impacted by significant capital expenditures. The company should focus on managing capital spending to improve free cash flow while maintaining its strategic growth initiatives.
Income Statement
75
Positive
Hydro One's income statement shows a steady growth in total revenue over recent years, with a revenue growth rate of 2.85% in the TTM (Trailing-Twelve-Months). The gross profit margin is solid at 32.98%, although slightly decreasing from previous years. Net profit margin remains strong at 13.99%, demonstrating the company's profitability. The EBIT margin of 27.93% and EBITDA margin of 34.78% indicate efficient operational performance. Overall, the company's profitability and growth trends are positive, though slight margin compression warrants monitoring.
Balance Sheet
70
Positive
Hydro One maintains a moderate debt-to-equity ratio of 1.45, reflecting a balanced approach to leveraging. The return on equity (ROE) is a healthy 9.96%, indicating effective use of shareholder funds to generate profits. The equity ratio of 33.05% suggests a stable capital structure, although a higher ratio would be preferable. The balance sheet reflects stability, with consistent equity growth, but the high level of debt could pose risks if not managed carefully.
Cash Flow
65
Positive
The company's cash flow statement shows a decline in free cash flow, which is negative in the TTM period, indicating challenges in generating excess cash after capital expenditures. The operating cash flow to net income ratio is 2.11, showcasing strong cash generation relative to net income. However, the free cash flow to net income ratio is negative due to high capital expenditures. While operating cash flow remains robust, the negative free cash flow signals potential liquidity issues if capital spending continues at the current rate.
Breakdown
TTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
8.73B8.48B7.84B7.78B7.22B7.29B
Gross Profit
2.88B3.03B2.84B2.80B2.53B2.37B
EBIT
2.44B2.12B1.84B1.96B1.72B1.57B
EBITDA
3.04B2.89B2.69B2.81B2.52B2.36B
Net Income Common Stockholders
1.22B1.16B1.08B1.05B965.00M1.79B
Balance SheetCash, Cash Equivalents and Short-Term Investments
123.00M716.00M79.00M530.00M540.00M757.00M
Total Assets
37.09B36.68B32.85B31.46B30.38B30.29B
Total Debt
17.79B17.73B15.74B15.19B14.72B14.41B
Net Debt
17.67B17.02B15.66B14.66B14.19B13.66B
Total Liabilities
24.75B24.51B21.09B20.07B19.41B19.67B
Stockholders Equity
12.26B12.09B11.68B11.31B10.89B10.53B
Cash FlowFree Cash Flow
-202.00M-274.00M-64.00M174.00M78.00M186.00M
Operating Cash Flow
2.58B2.53B2.41B2.26B2.15B2.03B
Investing Cash Flow
-3.41B-3.13B-2.69B-2.07B-2.06B-1.98B
Financing Cash Flow
267.00M1.23B-172.00M-197.00M-303.00M674.00M

Hydro One Technical Analysis

Technical Analysis Sentiment
Neutral
Last Price49.07
Price Trends
50DMA
50.32
Negative
100DMA
48.09
Positive
200DMA
46.38
Positive
Market Momentum
MACD
-0.25
Positive
RSI
38.42
Neutral
STOCH
14.46
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:H, the sentiment is Neutral. The current price of 49.07 is below the 20-day moving average (MA) of 50.10, below the 50-day MA of 50.32, and above the 200-day MA of 46.38, indicating a neutral trend. The MACD of -0.25 indicates Positive momentum. The RSI at 38.42 is Neutral, neither overbought nor oversold. The STOCH value of 14.46 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TSE:H.

Hydro One Peers Comparison

Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
TSCPX
77
Outperform
C$8.66B12.1115.24%4.59%-27.55%-12.05%
TSFTS
72
Outperform
$32.62B19.677.46%3.65%3.64%5.82%
TSEMA
72
Outperform
$18.03B20.557.12%4.68%8.17%31.60%
TSCU
72
Outperform
C$7.73B25.766.76%4.84%-0.53%-31.77%
TSH
67
Neutral
C$29.65B24.3110.15%2.54%9.95%11.34%
64
Neutral
$8.53B10.344.24%4.37%4.14%-13.04%
55
Neutral
$21.76B-5.97%6.03%22.01%-183.73%
* Utilities Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TSE:H
Hydro One
49.07
9.72
24.70%
TSE:FTS
Fortis
64.78
12.30
23.44%
TSE:BEP.UN
Brookfield Renewable Partners
35.31
1.41
4.16%
TSE:EMA
Emera
60.48
15.29
33.83%
TSE:CU
Canadian Utilities A
37.51
7.68
25.75%
TSE:CPX
Capital Power
55.64
16.32
41.51%

Hydro One Corporate Events

Executive/Board ChangesBusiness Operations and Strategy
Hydro One Limited Appoints Melissa Sonberg as New Chair of the Board
Positive
Jun 4, 2025

Hydro One Limited has appointed Melissa Sonberg as the new Chair of the Board of Directors, effective June 4, 2025. Sonberg, who has been a board member since 2018, brings extensive experience from her previous roles in healthcare, Air Canada, and AIMIA Inc. Her leadership is expected to guide Hydro One in its continued investment in a safe and reliable electricity system, crucial for Ontario’s growth and prosperity. The appointment comes at a pivotal time as the company focuses on enhancing its operations and supporting community development.

The most recent analyst rating on (TSE:H) stock is a Hold with a C$45.00 price target. To see the full list of analyst forecasts on Hydro One stock, see the TSE:H Stock Forecast page.

Business Operations and Strategy
Hydro One and Power Workers’ Union Ratify New Collective Agreement
Positive
Jun 2, 2025

Hydro One Inc. and the Power Workers’ Union have successfully ratified a new collective agreement effective from October 1, 2025, to March 31, 2028, which unifies the main and Customer Service Organization agreements. This agreement, reached ahead of the expiration of the previous one, highlights positive relations between the parties and ensures continued stability and service delivery in Ontario.

The most recent analyst rating on (TSE:H) stock is a Hold with a C$44.00 price target. To see the full list of analyst forecasts on Hydro One stock, see the TSE:H Stock Forecast page.

Business Operations and Strategy
Hydro One’s 2024 Sustainability Report Highlights Strategic Growth and Environmental Initiatives
Positive
May 16, 2025

Hydro One has released its 2024 Sustainability Report, highlighting its strategic alignment with sustainability to support growth and meet the increasing energy needs of Ontarians. Key achievements include converting 44% of sedans and SUVs to EVs or hybrids, exceeding Indigenous business spending goals, establishing pollinator habitats, and securing the Wawa Timmins Power Line project with First Nations support. The report underscores Hydro One’s commitment to sustainable development and its role in fostering a robust energy infrastructure in Ontario.

The most recent analyst rating on (TSE:H) stock is a Hold with a C$44.00 price target. To see the full list of analyst forecasts on Hydro One stock, see the TSE:H Stock Forecast page.

M&A TransactionsBusiness Operations and StrategyFinancial Disclosures
Hydro One Reports Strong Q1 2025 Results Amidst Operational Challenges
Positive
May 8, 2025

Hydro One Limited reported strong financial results for the first quarter of 2025, with a notable increase in earnings per share from $0.49 to $0.60 compared to the previous year. This growth was driven by higher revenues due to Ontario Energy Board-approved rates and increased peak demand. The company also completed a significant acquisition of a 48% interest in the East-West Tie Limited Partnership, enhancing its operational capabilities. In response to a severe ice storm, Hydro One successfully restored power to over 600,000 customers and launched a recovery grant to support affected communities. The company also reached a tentative settlement with the Power Workers’ Union and received accolades for its safety and sustainability efforts.

Business Operations and Strategy
Hydro One and Power Workers’ Union Reach Tentative Agreements
Positive
May 5, 2025

Hydro One Inc. and the Power Workers’ Union have reached tentative agreements for two collective agreements covering front-line employees in Ontario, pending ratification by the union membership. These agreements, once ratified, will be effective from October 1, 2025, potentially ensuring operational stability and continued service reliability for Hydro One’s customers.

Executive/Board Changes
Hydro One Announces Leadership Change with Chair Resignation
Neutral
Apr 30, 2025

Hydro One Limited announced the resignation of Tim Hodgson as Chair of the Board of Directors following his successful run in the federal election. Susan Wolburgh Jenah will serve as Interim Chair while the Board searches for a new Chair. This leadership change comes as Hydro One continues to focus on its role as a major electricity provider in Ontario, maintaining its commitment to community and economic support through significant investments in infrastructure and services.

Executive/Board Changes
Hydro One Appoints Susan Wolburgh Jenah as Interim Chair
Neutral
Mar 26, 2025

Hydro One Limited has appointed Susan Wolburgh Jenah as the Interim Chair of the Board of Directors, following Timothy Hodgson’s leave of absence to participate in the federal election. Susan Wolburgh Jenah brings extensive experience as a senior regulator and corporate director, which is expected to provide stability and strategic guidance during this transitional period for Hydro One.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.