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What Does NorthWestern Corporation’s Newly Added Risk Factor Tell Investors?
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What Does NorthWestern Corporation’s Newly Added Risk Factor Tell Investors?

NorthWestern Corporation (NWE), doing business as NorthWestern Energy, is an energy solutions company. It provides electricity and natural gas to customers in Nebraska, Montana, South Dakota, and Yellowstone National Park.

Let’s take a look at the company’s latest financial performance, corporate updates, and newly added risk factor. (See NorthWestern Corporation stock charts on TipRanks).

Q2 Financial Results

NorthWestern Corporation reported revenue of $298.22 million for Q2 2021, compared to $269.36 million in the same quarter last year, and beat the consensus estimate of $272.07 million. It posted EPS of $0.72, compared to $0.43 in the same quarter last year, and beat the consensus estimate of $0.47.

The company ended Q2 with $145.9 million in net liquidity, comprising $5.9 million in cash and a revolving credit facility of $140 million.

Corporate Updates

NorthWestern partly relies on money from share sales to finance its capital programs. In April, it agreed to sell up to $200 million in shares from time to time. It issued 879,309 shares during Q2 and raised $56.3 million. The company plans to issue more shares before the end of 2021 to raise the remaining amount under the equity offering agreement. NorthWestern now expects to end the year with 51.8 million to 52 million shares outstanding, up from prior expectations of  51.5 million to 51.8 million shares outstanding.

As a result of the expected increase in the number of shares outstanding and other factors, the company lowered the upper-end of its EPS outlook for full-year 2021 to $3.58 from $3.60 previously.

Risk Factors

The new TipRanks Risk Factors tool shows 17 risk factors for NorthWestern. Since Q4 2020, the company has updated its risk profile with one new risk factor under the Production category.

In the newly added risk factor, NorthWestern tells investors that prevailing macroeconomic conditions have resulted in shortages and higher prices of materials and components needed for its operations and capital projects. It warns that if these supply chain challenges persist, it could have difficulty achieving its capital investment program targets and serving its customers reliably. That could, in turn, have a material adverse impact on its business and financial condition.

The majority of NorthWestern’s risk factors fall under the Production category, with 29% of the total risks. That is above the sector average of 26%.

Analysts’ Take

In July, KeyBanc analyst Sophie Karp reiterated a Buy rating on NorthWestern but lowered the price target to $70 from $72. Karp’s new price target suggests 20.81% upside potential.

Consensus among analysts is a Moderate Buy based on 2 Buys. The average NorthWestern price target of $71 implies 22.54% upside potential to current levels.

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