BofA upgrades Black Hills to Neutral from Underperform with $64 price target

Black Hills (BKH) has been upgraded to Neutral from Underperform by BofA analyst Ross Fowler. The proposed merger with NorthWestern Energy (NWE) is expected to improve the fundamental outlook for Black Hills, with the transaction anticipated to close in 12-15 months. Fowler has increased his price target to $64 from $57.

Bank of America (BofA) analyst Ross Fowler has upgraded Black Hills Corp. (NYSE: BKH) to Neutral from Underperform, citing the strategic positioning following the merger with NorthWestern Energy (NWE). The upgrade comes with a new price target of $64, an increase from the previous $57.

Fowler believes that the merger, expected to close in 12-15 months, will improve Black Hills' fundamental outlook. The merger is anticipated to be accretive to each company's earnings per share (EPS) in the first year following the close of the transaction. The combined company supports a long-term EPS target growth rate of 5% to 7% [2].

However, Fowler remains concerned over debt refinancing and likely equity needs to fund capital spending. He awaits details on how new management plans to achieve its 5%-7% EPS compound annual growth rate (CAGR), which is an improvement over the legacy 4%-6% EPS CAGR. Regulatory and execution risk around large projects could keep valuation constrained until growth visibility improves [1].

The merger deal requires no new equity, but it increases the importance of internal funding. While management has not formally addressed dividend strategy, the combined entity may need to revisit its payout ratio post-close to support capital expenditure (capex) with retained earnings [1].

Black Hills and NorthWestern Energy announced the merger on August 19, 2025, with the combined company expected to have a pro forma market capitalization of approximately $7.8 billion and a combined enterprise value of $15.4 billion [2].

References:
[1] https://seekingalpha.com/news/4487606-black-hills-upgraded-at-bofa-as-northwestern-merger-boosts-strategic-outlook
[2] https://ir.blackhillscorp.com/news-releases/news-release-details/black-hills-corp-and-northwestern-energy-combine-all-stock