Algonquin Power shows "big numbers" and a small price increase

Algonquin Power is a bit of a mystery these days.It recently released it's second quarter report and it had some "big numbers".However investors barely reacted to it;the stock chugged ahead to $13.80 while it had been $13.25 before the report.It certainly isn't because AQN is not doing it's work.They have been very busy!Recently it announced that it had completed the acquisition of Empire District Electric and this took about  18 months to wrap up.It also(in this quarter) bought a few generating stations in California.Consequently AQN revenues were up 103% over the same quarter in 2016.

Earnings, earnings,earnings

All categories of earnings were up over the same quarter of 2016.Net earnings at $47 million was up 92% to$47 million for the second quarter and for six months at $74 million up from $67 million in 2016.Adjusted EBITDA went from $99 million  in 2016 to $198 million .For the six month period  adjusted EBITDA went from $247 million to $452 million.While adjusted funds fiom operations went from $78 million to $120 million for Q2 and from $197 million to $328 million for six months.This is a good earnings report.But the problem is that the trajectory of the growth in earnings is greater than the trajectory of the share price.AQN shares are chugging along but not nearly as well as the growth in earnings.

Recommendations       

This blog has two recommendations that could improve their share price.First it should be noted that the yield on AQN shares at 3.42% is below the industry average  yield.AQN's big increases in earnings could easily support a dividend increase to bring a 4.0% yield. But this will improve their trajectory only slightly.In order for Algonquin Power to reach $15 and above it will need to  release some of the equity that now appears to be locked in the American regulatory umbrella.A new equity issue from Algonquin or better from the newly formed Liberty Utilities (listed on the NYSE) would be needed to raise cash that is used to buy Canadian assets or even a small Canadian or Can -Am utility.A purchase of Atlantic Power or Alterra Power or even Boralex would show that earnings and assets under the American regulated umbrella is not locked in.An acquisition that is only slightly accretive to Algonquin's own earnings would "do the trick".Shareholders would surely approve of this strategy.            use Workathon for analysis of Cdn. utilities;use Workathon for utility solutions