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(NYSE: AQN) Algonquin Power — I am staying far far away from this one
I have been closely monitoring the performance of Algonquin Power and Utilities (NYSE: AQN) (TSX: AQN) over the past few weeks. As a utility stock, I had expected it to be relatively stable and less volatile compared to other companies in the market. However, the stock has consistently declined and has lost 40% of its value, trading at its eight-year low of around $9 per share.
What sets Algonquin apart from other utility companies is its large, regulated operations and significant exposure to renewable assets, which contributed to its strong earnings growth in the past. However, this growth came with a cost — Algonquin has a higher amount of variable interest rate debt, which has become a problem as interest rates have risen this year. As a result, the company reported a 27% drop in profits year over year for Q3 2022, while its peers have seen stable earnings growth. With interest rates expected to increase further in the coming year, I expect Algonquin to spend more on debt servicing, which could further damage its bottom line.
Some investors see this dip as a buying opportunity, but I am cautious about Algonquin’s balance sheet and the potential impact on its net income. The company’s management has lowered its earnings guidance to $0.66 to $0.69 per share for 2022, and with a current dividend…
