Black Hills Corporation: Upranking from Hold to Buy with Strong Growth Potential

Black Hills Corporation is a holding company with 1.35 million natural gas and electricity customers. It has a diverse portfolio of residential/commercial gas utilities, electric generation and utilities, and transmission and generation. Despite experiencing growth in its electric generation and utilities segment, the company's stock has been underperforming. However, the author believes that the stock is undervalued and recommends upgrading it from Hold to Buy.

Title: Black Hills Corporation: A Diverse Utility Holding Company with Growth Prospects

Black Hills Corporation (NYSE: BKH), a holding company with 1.35 million natural gas and electricity customers, has been experiencing growth in its electric generation and utilities segment. Despite this, the company's stock has been underperforming. However, the author believes that the stock is undervalued and recommends upgrading it from Hold to Buy.

The company's diverse portfolio includes residential/commercial gas utilities, electric generation and utilities, and transmission and generation. It has 1,128,000 natural gas customers and 225,000 electric customers. The natural gas segment, which sees the largest revenues in the fourth and first quarters, is experiencing growth due to increasing demand for natural gas to generate electricity. The company's electricity segment is also seeing growth in data center demand and general regional growth [2].

In the second quarter of 2025, Black Hills reported net income of $27.5 million or $0.38/share, compared to $22.8 million, or $0.33/share for Q2 2024. The company's 4.67% dividend is attractive compared to the 10-year US Treasury rate of 4.38% [2].

The company's natural gas operations are mostly residential and commercial, with a small slice of industrial demand. The company has 44,524 miles of gas distribution mains and service lines, 4648 miles of intrastate transmission pipelines, 516 miles of gathering lines, seven natural gas storage sites, and about 50,000 horsepower of compression. The company has ready access to natural gas from the Rockies, including Montana and Wyoming, North Dakota (oil-associated gas), and Appalachia via pipelines [2].

Black Hills' electricity utilities include Colorado Electric, South Dakota Electric, Wyoming Electric, and Integrated Generation. The company's three-year average wind capacity factor is 35.5%. The company's natural gas turbine construction is meeting the sharp uptick in near-term power demand from AI data centers because gas-fired generation can be brought online more quickly than new nuclear generation [2].

The company's long-term EPS growth goal is 4-6% annually. The company is well-positioned to meet this with investments in transmission and its several generation sources: natural gas, coal, wind, and purchased power. The company's stock has a relatively low beta of 0.68, indicating that it does not fluctuate as sharply as the overall market [2].

The company's stock has been down -6.5% since the author's last review in November 2024. However, the author believes that the stock is undervalued and recommends upgrading it from Hold to Buy due to its growth prospects, its competitive dividend, and its range of generation fuels, including coal [2].

References
[1] https://ir.blackhillscorp.com/stock-information/historic-prices
[2] https://seekingalpha.com/article/4807374-why-upranking-black-hills-stock-from-hold-to-buy-q2-earnings