BMO Capital Markets has sustained its positive stance on Emera Inc. (EMA: CN) (OTC: EMRAF), reiterating an Outperform rating along with a Cdn$54.00 price target.
The firm's analysis suggests that despite the dilutive impact of recent asset sales on shareholders, these strategic decisions are expected to strengthen the company's balance sheet. This financial restructuring is anticipated to support a valuation increase as Emera's financial risk is reduced.
The analyst from BMO Capital highlighted that Emera's shares had been under pressure due to the equity dilution from asset sales. However, they are optimistic about the company's future, noting that the steps taken are significant and judicious.
The expectation is that these measures will facilitate valuation expansion, especially as Emera's forward price-to-earnings (P/E) ratio stands at 16 times, compared to an average of 18 times among utility peers.
Emera's performance in the first half of the year was softer, but BMO Capital foresees a stronger second half driven by a lower interest rate environment, the positive effects of asset sales, and the advantages of recent rate decisions.
The financial firm also pointed out the improved visibility towards achieving a 12%+ funds from operations (FFO) to debt ratio for Emera. This metric is an important indicator of financial health and stability for companies, and reaching this level is seen as a positive sign for Emera's financial strategy.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.