Black Hills stock slides after 2023 earnings guidance cut

Black Hills Corp. shares dipped nearly 6% in after-hours trading Feb. 7 after the company lowered 2023 earnings guidance to $3.65 to $3.85 per share from a range of $4.00 to $4.20 per share.

The Rapid City, S.D.-headquartered utility attributed the update to a "rapid shift in macroeconomic factors" such as inflation and interest rate pressures as well as heightened gas price volatility and demand due to a December 2022 winter storm.

The new guidance reflects "additional carrying costs," including about $615 million in investments instead of $600 million; $140 million to $160 million of equity issuances instead of $130 million to $150 million; $180 million to $185 million of interest expense instead of $165 million to $170 million; and $600 million to $610 million of total operating expenses instead of a previous range of $595 million to $605 million, according to a news release.

Black Hills also decided to end the process of shopping a minority interest in its gas utilities to fund equity needs because "the terms and conditions of the bids did not meet criteria sufficient to justify a transaction."

Mizuho told clients in January that rising interest rates have dampened private equity firms' interest in acquiring utility assets amid a "cooling-off period" for such transactions, potentially eliminating a popular avenue for many utility holding companies looking to mitigate commodity and interest costs.

Black Hills also lowered its long-term EPS growth target to 4% to 6% from 5% to 7%. Wells Fargo wrote in November that Black Hills' 2022 results and previous 2023 guidance did "not inspire confidence" that the company could achieve a growth rate of 5% to 7%.

President and CEO Linden Evans said during a third-quarter 2022 earnings conference call in November that the company expected to "be toward that higher end of that growth rate in those outer years."

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.