ALLETE Misses Q1 Estimates: What Investors Need to Know About the $0.97 EPS Result

ALLETE, Inc. (NYSE: ALE) reported its first-quarter 2025 earnings on May 8, 2025, with a diluted EPS of $0.97, narrowly missing the consensus analyst estimate of $1.01. While the company posted a modest 6.59% year-over-year (YoY) rise in EPS compared to Q1 2024’s $0.91, the miss of $0.04 underscores persistent challenges in meeting expectations. Revenue also declined 1.6% YoY to $332.8 million, amplifying concerns about the utility company’s growth trajectory. Here’s what investors need to consider.

Breaking Down the Q1 Results

The miss, though small, aligns with ALLETE’s recent pattern of inconsistent performance. In Q1 2024, the company missed estimates by $0.12, and in Q3 2024, it fell short by $0.21. Analysts had already lowered their expectations slightly over the past 60 days, with the consensus estimate rising to $1.01 from an initial $0.99. Despite upward revisions in the final weeks, the company still fell short.

The stock reacted mutedly, dropping just 0.03% to $65.16 the day after earnings—a sign that the miss may have been priced in. Meanwhile, the company’s full-year 2025 revenue growth estimate of 14.94% (to $1.76 billion) remains ambitious given the first-quarter stumble.

Key Drivers and Risks

1. Revenue Struggles: The $332.8 million Q1 revenue marked the third consecutive quarter of declines compared to the same periods in 2023. Weakness in its utility and energy segments likely contributed to this trend.
2. Analyst Sentiment: While the consensus price target of $65.75 is nearly identical to the current share price, analysts remain divided. “Hold” ratings dominate, with price targets ranging from $56 to $73—a wide spread reflecting uncertainty.
3. Comparisons to the S&P 500: ALLETE’s projected 15.34% YoY EPS growth for Q1 2025 outperformed the S&P 500’s 12.5% growth estimate. However, its inability to consistently hit targets undermines confidence.

Historical Context and Full-Year Outlook

ALLETE’s struggles to beat estimates are not new. Over the past year:
- Q1 2024: Missed by $0.12 (EPS $0.91 vs. $1.03 est.).
- Q2 2024: Missed by $0.30 (EPS $0.78 vs. $1.08 est.).
- Q3 2024: Missed by $0.21 (EPS $0.78 vs. $0.99 est.).

Analysts are now projecting an EPS of $0.99 for Q2 2025—a slightly lower bar than Q1’s $1.01. The full-year EPS estimate stands at $3.66, up 14.9% from 2023. However, achieving this will require a sharp rebound in revenue, which has yet to stabilize.

Conclusion: A Cautionary Hold

ALLETE’s Q1 miss reinforces its reputation as a company that consistently underdelivers on expectations. While the $0.97 EPS still represents YoY growth and the stock’s muted reaction suggests limited downside, investors should proceed with caution. Key considerations:

1. Valuation: At $65.16, ALLETE trades near its average price target of $65.75. This suggests limited upside unless earnings surprises improve.
2. Growth Ambitions: The company’s focus on renewable energy projects (e.g., wind and solar initiatives) could pay dividends long-term, but execution risks remain.
3. Competitor Comparison: The S&P 500’s projected 7.95% revenue growth for 2025 outpaces ALLETE’s 14.94%—a red flag for investors seeking growth.

In the near term, ALLETE appears stuck in neutral. Investors should wait for signs of sustained outperformance—such as a beat in Q2 or a revenue turnaround—before considering a buy. For now, the Hold rating reflects the company’s inconsistent execution and the low-risk/reward profile at current prices.

Data as of May 8, 2025.