Algonquin Power & Utilities Q1 2025 Earnings Preview: Navigating Declines and Regulatory Uncertainty

Algonquin Power & Utilities (TSX/NYSE: AQN) is set to report its first quarter 2025 earnings on May 9, with analysts anticipating a challenging quarter marked by year-over-year declines in both revenue and earnings. The results will test investors’ patience as the utility firm grapples with downward revisions, regulatory headwinds, and a track record of missing estimates.

Key Financial Expectations

Analysts project Q1 2025 diluted EPS of $0.09, a 35.7% drop compared to the $0.14 reported in Q1 2024. Revenue is forecasted to fall to $665.6 million, a 9.7% decline from the prior-year period. These figures reflect persistent headwinds, including reduced operational performance and lower demand. Over the past 30 days, the consensus EPS estimate has been revised downward by 3.85%, underscoring growing skepticism.

The Zacks Earnings ESP model, however, signals a +6.38% surprise potential, driven by upward adjustments in the “Most Accurate Estimate” — a subset of recent analyst revisions. This positive tilt is tempered by AQN’s current Zacks Rank #4 (Sell), which historically weakens the reliability of such predictions.

Historical Performance and Missed Targets

AQN’s recent performance has been uneven. In Q4 2024, it reported an EPS of $0.06, missing the $0.08 estimate by 25%, while revenue fell short by 3.66%. Over the past four quarters, the company has only beaten estimates once. Its Q4 2024 results included an eye-catching $0.47 net loss (versus a projected $0.10 profit), driven by non-cash impairments and project delays.

The stock’s year-to-date performance reflects this volatility, with shares down 17.5% since May 2024. The median Wall Street price target of $5.50 remains below the current trading price of $7.55, signaling limited optimism.

Dividend Sustainability and Balance Sheet Risks

AQN’s dividend yield has long been a key investor attraction, but its payout ratio of -14.44% — calculated using negative earnings — raises red flags. Sustaining dividends in the face of losses could strain liquidity, particularly as the company’s debt-to-equity ratio stands at 1.17, near the upper end of its target range.

Analyst Sentiment and Peer Comparison

Analysts’ average recommendation of Hold (average rating 2.8) reflects cautious optimism. While the consensus 12-month price target of $7.77 implies a modest 2.96% upside, this pales against peers like Fortis (FTS), which is expected to report $0.69 EPS for Q1 2025 — a 2.9% revenue growth compared to AQN’s projected decline.

What to Watch for in the Earnings Call

1. Operational Updates: Management will likely address project delays and cost-control measures, particularly in renewable energy segments.
2. Regulatory Guidance: Updates on pending rate cases in key markets (e.g., Midwest Energy assets) could influence long-term earnings stability.
3. Dividend Policy: Investors will scrutinize commentary on dividend sustainability amid negative earnings.
4. 2025 Full-Year Outlook: Any revisions to the $0.43 EPS guidance for the year will impact sentiment.

Risks and Opportunities

• Downside Risk: A miss on EPS could trigger a 5-10% selloff, especially if guidance is cut further.
• Upside Catalyst: A beat on the $0.09 estimate — paired with constructive forward guidance — might lift shares toward the $8.50-$9.00 range, though this hinges on credibility after recent misses.

Conclusion

Algonquin Power & Utilities faces a critical juncture in Q1 2025. While the Zacks ESP hints at a potential positive surprise, the company’s Zacks Rank #4, historical misses, and negative earnings cloud the outlook. With a median price target of $5.50 and a payout ratio in negative territory, investors must weigh near-term risks against AQN’s long-term renewable energy growth strategy.

The $0.09 EPS estimate serves as a baseline, but the market will demand clarity on cost management, regulatory progress, and dividend sustainability. Until these factors stabilize, AQN’s stock remains a speculative play for investors willing to bet on a turnaround in one of the utilities sector’s more volatile players.