On Thursday, Roth/MKM has increased its price target for Ormat Technologies (NYSE:ORA) shares, setting the new goal at $87.00, up from the previous target of $80.00, while reiterating a Buy rating on the stock. This adjustment arrives ahead of Ormat's third-quarter earnings report.
The firm's analyst has updated the company's interest expense forecast, leading to an approximate 5% reduction in the earnings per share (EPS) estimates for the years 2024-2026. Despite this downward revision in the near-term EPS forecasts, the firm maintains a positive outlook on Ormat's future, underpinned by the anticipation of a sustained increase in demand for renewable energy. This demand is expected to exert upward pressure on Power Purchase Agreements (PPAs) due to existing supply constraints.
The analyst's statement highlighted the expectation of a continued improvement in Ormat's long-term prospects, despite the near-term estimate adjustments. The firm is particularly interested in the company's upcoming earnings report for insights on the pricing trends and the advancements in PPA contracts that are currently under negotiation.
Ormat Technologies, which specializes in geothermal and recovered energy power, is poised to benefit from the growing shift towards renewable energy sources. The firm's analyst has emphasized the importance of PPAs in the company's business model, as these contracts are crucial for the stability and predictability of revenue streams in the energy sector.
In other recent news, Ormat Technologies has reported significant developments in its operations and financial performance. The company has signed two seven-year tolling agreements with Equilibrium Energy for energy storage facilities in Texas, marking its initial entrance into the ERCOT market. These agreements, which secure fixed revenues, have facilitated the commencement of the 100MW/200MWh Louisa project, expected to be operational by the end of 2026.
In addition, Ormat has inked a 15-year agreement with the City of Riverside, expanding its footprint in the energy storage market. This deal relates to Ormat's 80MW/320MWh Shirk Battery Energy Storage System in Visalia, California.
Financially, Ormat has seen considerable growth, with revenues up 21%, earnings per diluted share rising by 25.5%, and a 14.4% increase in adjusted EBITDA. The company has also issued an additional $45.2 million in 2.50% Convertible Senior Notes due 2027 and revised its CapEx budget for 2024 up to $550 million to $570 million due to heightened demand for storage projects.
On the analyst front, Oppenheimer has adjusted their price target for Ormat Technologies shares to $85.00, maintaining an Outperform rating. These are the recent developments at Ormat Technologies.
InvestingPro Insights
As Ormat Technologies (NYSE:ORA) approaches its third-quarter earnings report on November 6, 2024, InvestingPro data offers additional context to Roth/MKM's optimistic outlook. The company's market capitalization stands at $4.75 billion, reflecting its significant presence in the renewable energy sector. Ormat's revenue growth of 16.43% over the last twelve months ending Q2 2024 aligns with the analyst's expectations of increased demand for renewable energy.
InvestingPro Tips highlight that Ormat is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.88. This suggests that the stock may be undervalued considering its growth prospects, potentially supporting Roth/MKM's increased price target. Additionally, Ormat has maintained dividend payments for 20 consecutive years, demonstrating financial stability that could appeal to long-term investors in the renewable energy space.
For those interested in a deeper analysis, InvestingPro offers 8 additional tips that could provide further insights into Ormat's financial health and market position.
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