Education
About Us
Working with TipRanks
Follow Us
Hydro One Limited (TSE:H)
TSX:H
Top Page
Hydro One
(TSX:H)
74Outperform
Positive Factors
Earnings Growth
Hydro One's EPS growth is expected to continue outpacing its rate base through 2027.
Financial Strategy
Newly appointed CFRO Harry Taylor reaffirmed the 5-7% EPS guidance through 2027, that no equity is required during that timeframe, and that the financial strategy will be unchanged.
Long-term Investment
Positive on the shares long term given the visible long-dated capex program, high-quality asset base, and strong balance sheet.
Negative Factors
Market Performance
The significant share outperformance vs. S&P/TSX Utilities Index, the premium P/E valuation of 21x, and the relative return to the unchanged $42 target drive the rating to Market Perform from Outperform.
Regulatory Uncertainty
There is uncertainty around the outcome of Hydro One's cost of capital review with the OEB, which could alter its ROE/equity layer.
Valuation
Hydro One shares are currently trading at a 35% premium to peers and are fully valued.
Hydro One (H) vs. S&P 500 (SPY)
Market Cap
C$28.71B
Dividend Yield2.59%
Average Volume (3M)1.01M
Price to Earnings (P/E)24.6
Beta (1Y)0.50
Revenue Growth8.16%
EPS Growth6.48%
CountryCA
Employees7,044
SectorUtilities
Sector Strength84
IndustryRegulated Utilities
Share Statistics
EPS (TTM)1.93
Shares Outstanding599,435,670
10 Day Avg. Volume1,410,510
30 Day Avg. Volume1,008,073
Financial Highlights & Ratios
PEG Ratio3.79
Price to Book (P/B)N/A
Price to Sales (P/S)4.49
Price to Cash Flow (P/CF)10.20
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$46.00Price Target Upside-4.25% Downside
Rating ConsensusHold
Number of Analyst Covering7
Hydro One Business Overview & Revenue Model
Company DescriptionHydro One Limited is a leading Canadian electricity transmission and distribution service provider headquartered in Toronto, Ontario. The company operates in the utilities sector and is primarily responsible for the transmission of high-voltage electricity across Ontario and the distribution of electricity to approximately 1.4 million residential and business customers. Hydro One's core services include maintaining and operating extensive electricity networks, ensuring reliable power delivery, and developing infrastructure projects to enhance the energy grid.
How the Company Makes MoneyHydro One generates revenue primarily through its electricity transmission and distribution services. The company earns money by charging regulated rates approved by the Ontario Energy Board for the delivery of electricity through its infrastructure. These rates are designed to cover the costs of maintaining and upgrading the grid while providing a return on investment. Additionally, Hydro One engages in infrastructure projects and partnerships that contribute to its revenue, such as expanding and modernizing its transmission and distribution networks to accommodate growing demand and integrate renewable energy sources. The company's earnings are also influenced by factors such as regulatory decisions, capital investments, and operational efficiencies.
Hydro One Financial Statement Overview
Summary
Hydro One showcases overall financial stability and consistent revenue growth, supported by strong operational cash flows. Despite an increase in leverage and negative free cash flow due to high capital expenditures, the company's profitability and return metrics remain robust. The balance sheet reflects a solid equity base, which balances the increased debt levels. Continued monitoring of cash flow and EBIT margins would be prudent to ensure sustained financial health.Income Statement
Hydro One has demonstrated solid revenue growth, increasing from CAD 6.48 billion in 2019 to CAD 8.48 billion in 2024. The gross profit margin has been stable, averaging around 36% over the years, indicating strong cost management. However, EBIT margins have declined to 0% in 2024, which could be a concern for operational efficiency. The net profit margin has been consistent, hovering around 13%-15%, reflecting stable profitability.85
Very Positive
Balance Sheet
The company's debt-to-equity ratio increased slightly from 1.30 in 2019 to 1.47 in 2024, suggesting a moderate increase in leverage. Return on Equity (ROE) remains healthy, around 9%-10%, indicating efficient utilization of equity capital. The equity ratio has been stable at approximately 30%, providing a strong buffer against liabilities. Overall, the balance sheet reflects a stable financial position with manageable leverage.78
Positive
Cash Flow
Hydro One's operating cash flow has been on an upward trend, reaching CAD 2.53 billion in 2024. However, free cash flow has been negative in recent years due to high capital expenditures, indicating significant reinvestment into the business. The operating cash flow to net income ratio remains strong, showing the company's ability to convert profits into cash. While the negative free cash flow raises concerns, it is typical for utilities investing heavily in infrastructure.70
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 8.48B | 7.84B | 7.78B | 7.22B | 7.29B | Gross Profit |
| 3.03B | 2.84B | 2.80B | 2.53B | 2.37B | EBIT |
| 0.00 | 1.84B | 1.96B | 1.72B | 1.57B | EBITDA |
| 2.89B | 2.69B | 2.81B | 2.52B | 2.36B | Net Income Common Stockholders |
| 1.16B | 1.08B | 1.05B | 965.00M | 1.79B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 716.00M | 79.00M | 530.00M | 540.00M | 757.00M | Total Assets |
| 36.68B | 32.85B | 31.46B | 30.38B | 30.29B | Total Debt |
| 17.73B | 15.74B | 15.19B | 14.72B | 14.41B | Net Debt |
| 17.02B | 15.66B | 14.66B | 14.19B | 13.66B | Total Liabilities |
| 24.51B | 21.09B | 20.07B | 19.41B | 19.67B | Stockholders Equity |
| 12.09B | 11.68B | 11.31B | 10.89B | 10.53B |
| Cash Flow | Free Cash Flow | |||
| -274.00M | -64.00M | 174.00M | 78.00M | 186.00M | Operating Cash Flow |
| 2.53B | 2.41B | 2.26B | 2.15B | 2.03B | Investing Cash Flow |
| -3.13B | -2.69B | -2.07B | -2.06B | -1.98B | Financing Cash Flow |
| 1.23B | -172.00M | -197.00M | -303.00M | 674.00M |
Hydro One Technical Analysis
Positive
48.04
Price Trends
44.98
Positive
44.91
Positive
43.64
Positive
Market Momentum
0.78
Negative
68.70
Neutral
88.97
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:H, the sentiment is Positive. The current price of 48.04 is above the 20-day moving average (MA) of 45.82, above the 50-day MA of 44.98, and above the 200-day MA of 43.64, indicating a bullish trend. The MACD of 0.78 indicates Negative momentum. The RSI at 68.70 is Neutral, neither overbought nor oversold. The STOCH value of 88.97 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:H.
Hydro One Peers Comparison
Overall Rating
UnderperformOutperform
Sector (65)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $32.39B | 19.80 | 7.47% | 3.85% | -0.08% | 4.76% | |
74 Outperform | C$28.71B | 24.57 | 9.73% | 2.59% | 8.16% | 6.48% | |
72 Outperform | $17.62B | 34.88 | 4.50% | 5.01% | 7.16% | -52.28% | |
70 Neutral | C$7.12B | 23.48 | 6.93% | 5.21% | -1.42% | -36.31% | |
65 Neutral | $11.91B | 15.60 | 6.55% | 4.41% | 7.00% | 0.55% | |
55 Neutral | $18.40B | 704.25 | 0.96% | 5.84% | 17.33% | -14.76% | |
44 Neutral | $5.20B | ― | 1.65% | 7.13% | -6.41% | -282.03% |
* Utilities Sector Average
Performance Comparison
TSE:H
Hydro One
48.04
7.61
18.82%
BIP
Brookfield Infrastructure
28.23
0.08
0.28%
TSE:FTS
Fortis
64.03
12.61
24.51%
TSE:AQN
Algonquin Power & Utilities
6.78
-1.02
-13.09%
TSE:EMA
Emera
59.19
13.66
30.01%
TSE:CU
Canadian Utilities A
34.75
5.75
19.83%
Hydro One Earnings Call Summary
Earnings Call Date: Feb 20, 2025 | % Change Since: 7.50% | Next Earnings Date: May 2, 2025
Earnings Call Sentiment Positive
The earnings call presented a positive outlook with strong safety performance, improved customer satisfaction, successful capital investments, and robust financial performance. However, there are challenges related to tariff uncertainties and increased costs in interest and depreciation, along with notable executive changes.Highlights
Strong Safety Performance
Hydro One achieved a recordable injury rate of 0.55 for 200,000 hours, below the world class benchmark of 1.0, earning the Electricity Canada's President's Award of Excellence for Employee Safety in the Transmission segment for the third consecutive year.
Customer Satisfaction Improvement
Residential and small business customer satisfaction scores increased to 88%, while commercial and industrial customer satisfaction scored 85%, demonstrating improvements in customer experience.
Capital Investments and Project Completion
Deployed over $3 billion in capital and in-serviced approximately $2.5 billion of assets in 2024. The Chatham by Lakeshore Transmission project was completed one year ahead of schedule and $30 million under budget.
Financial Performance
Fourth quarter basic earnings per share increased to $0.33 from $0.30 in 2023, and full-year earnings per share rose to $1.93 from $1.81 in 2023, with a net income increase of 10.5% in Q4.
Productivity Savings
Achieved $150 million in productivity savings in 2024, continuing a trend from prior years, with savings weighted more towards capital expenditures.
Dividend Declaration
Declared a dividend of $0.3142 per share for shareholders of record on March 12, 2025.
Sustainable Financing
Issued $2.75 billion in medium-term notes under the sustainable financing framework in 2024.
Lowlights
Tariff Uncertainty
Concerns about the evolving tariff situation and its potential impact on the business, with ongoing discussions in Washington regarding trade tensions between Canada and the US.
Organizational Changes
Departure of Andrew Spencer, Executive Vice President of Capital Portfolio Delivery, requiring a search for a replacement.
Interest and Depreciation Costs
Higher depreciation, amortization, and asset removal costs, along with a 7.5% increase in interest expense due to higher interest rates and more long-term debt.
Company Guidance
During Hydro One's Fourth Quarter 2024 Analyst Teleconference, the company provided comprehensive guidance and updates on various performance metrics. Notably, Hydro One reported a recordable injury rate of 0.55 per 200,000 hours, below the world-class benchmark of 1.0, reflecting their strong safety culture. Customer satisfaction scores improved significantly, with residential and small business satisfaction rising to 88%, and commercial and industrial scores maintaining an 85% rating. Financially, Hydro One achieved productivity savings of $150 million and deployed over $3 billion in capital, placing approximately $2.5 billion of assets in service. This investment supports Ontario's economic growth and clean electricity demand. The company also upgraded its earnings per share guidance for 2027 to a range of $2.15 to $2.37, indicating a 6% to 8% annualized growth, driven by increased rate base growth and strategic acquisitions such as the 48% interest in the East West Tie transmission line.Hydro One Corporate Events
Business Operations and StrategyFinancial Disclosures
Hydro One Achieves Strong Q4 Earnings and Advances Infrastructure Initiatives
Positive
Feb 20, 2025
Hydro One reported a fourth-quarter increase in basic earnings per share to $0.33, attributed to higher revenues from approved transmission and distribution rates and reduced operational expenses. The company continues to make strategic investments in infrastructure projects and has enhanced its earnings growth guidance, reflecting its commitment to cost optimization and sustainable development, alongside receiving recognition for employee safety.
Hydro One to Build Key Ontario Transmission Line
Dec 17, 2024
Hydro One has been selected to develop a critical transmission line in northeast Ontario, in partnership with First Nations, to support the increasing electricity demand driven by population growth and economic activities. This project, backed by the Ontario government’s directive, emphasizes Hydro One’s commitment to Indigenous partnerships and aims to enhance community connectivity and sustainability.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.