Black Hills Corp (NYSE: BKH) bottomed in February and has gained around 25 percent since then, but Bank Of America Merrill Lynch sees no catalysts that could push the stock higher.
Black Hills stock is trading at four-year high premiums without any clear justification and no major positive catalysts ahead, Dumoulin Smith said in a Thursday downgrade note. (See the analyst's track record here.)
The stock's recent rally was partly driven by a lag in recognition of smid-cap improvement and execution in upside capital expenditure items, the analyst said. Black Hills shares should not be assigned a merger-and-acquisition premium due to extensive regulatory obstacles, he said.
BofA's price objective for to stock was lifted to reflect improvements in regulated gas and electric utility multiples, but the new price objective implies a negative total return, Dumoulin Smith said.
The company has started on a process to collapse its gas local distribution companies, which could lead to a great deal of regulatory uncertainty, the analyst said.
While the process could provide more clarity for investors in the long run, the analyst said he's concerned about the short-term risk of a loss of advantageous earnings mechanisms and structures.
The Price Action
Black Hills stock was down 1.51 percent at $61.40 at the close Thursday.
Benzinga's Top Upgrades, Downgrades For July 12, 2018
An Analyst's Black Hills Corp. Outlook Dims On These Twin Risks
Latest Ratings for BKH
|Jul 2018||Bank of America||Downgrades||Neutral||Underperform|
|May 2018||Credit Suisse||Maintains||Neutral||Neutral|
|Apr 2018||JP Morgan||Maintains||Neutral||Neutral|
View More Analyst Ratings for BKH
View the Latest Analyst Ratings
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