BKH: Ready Wyoming And Nebraska Settlement Will Support Measured Long Term Outlook

Analysts have nudged their price target on Black Hills slightly higher to around $75.75, with the change supported by updated fair value work and a modestly lower forward P/E assumption informed by recent Street research, including a $2 target move cited in BofA commentary.

Analyst Commentary

Bullish Takeaways

Bullish analysts view the higher fair value work and the revised target around $75.75 as consistent with execution that they see as broadly in line with current expectations.
The modestly lower forward P/E assumption is seen as a way to keep valuation discipline while still reflecting confidence in Black Hills' ability to support its earnings profile.
The $2 price target move cited in recent research is framed as a fine tuning of models rather than a major shift, which bullish analysts interpret as steady conviction rather than a swing in sentiment.
Supportive commentary around fair value suggests that, at the updated target, bullish analysts see a balance between regulated utility stability and the price investors are being asked to pay.

Bearish Takeaways

Bearish analysts point to the lower forward P/E assumption as a signal that valuation needs to stay restrained, which they see as a reminder that upside may rely heavily on consistent execution.
The relatively small $2 target move is viewed as incremental, which cautious investors may read as limited near term willingness to assign a higher multiple.
Some bearish analysts highlight that the target change is mainly driven by model refinements, which they see as offering less evidence of a stronger fundamental growth story.
Cautious views focus on the risk that if earnings or project timing fall short of expectations, the room for a premium P/E multiple could be constrained relative to the current fair value work.

What's in the News

Completion and energization of the 260 mile, US$350 million Ready Wyoming electric transmission expansion project, interconnecting Black Hills' electric systems in South Dakota and Wyoming and placed in service on schedule in December 2025 (Key Developments).
Ready Wyoming is expected to support long term cost stability for customers, improve system resiliency and access to power markets, and support future energy resource development in Wyoming (Key Developments).
Approximately US$300 million of the Ready Wyoming transmission investment is being recovered through the Wyoming Transmission Rider, with about US$50 million expected to be recovered through base rates during the next rate review (Key Developments).
Nebraska natural gas utility subsidiary received approval from the Nebraska Public Service Commission for a unanimous settlement agreement, providing recovery of over US$453 million of system investments since 2020 and related operational costs for more than 304,000 customers (Key Developments).
The Nebraska settlement supports approximately US$23.9 million of new annual revenues and migrates about US$18.5 million from rider revenue to base rates for a total annual base rate revenue increase of US$42.4 million, with rates based on a 9.85% return on equity and a 50.5% or 49.5% equity to debt capitalization mix, effective January 1, 2026 (Key Developments).

Valuation Changes

Fair Value: Adjusted slightly from US$76.50 to about US$75.75, reflecting a modest trim to the modeled equity value.
Discount Rate: Held effectively steady at about 6.96%, with only a very small numerical adjustment.
Revenue Growth: Kept essentially unchanged at about 10.18%, with only a minor rounding difference in the updated model.
Net Profit Margin: Maintained at roughly 12.60%, with a very small numerical refinement in the latest inputs.
Future P/E: Reduced slightly from about 21.51x to about 21.30x, signaling a small tightening in the assumed valuation multiple.

Growing demand from tech-driven customers and regional development is accelerating volumetric growth and supporting long-term revenue expansion.
Major capital investments and innovative regulatory strategies are strengthening earnings, cash flow stability, and future margins above industry averages.
Heavy infrastructure investment and reliance on concentrated, volatile customer segments make Black Hills vulnerable to regulatory delays, evolving energy trends, and regional or environmental risks.

Catalysts

About Black Hills

Through its subsidiaries, operates as an electric and natural gas utility company in the United States.What are the underlying business or industry changes driving this perspective?

Accelerated demand growth from hyperscale data center and blockchain customers-along with broader population and economic development across the Mountain West-is driving substantial increases in electricity peak loads and utility customer counts, pointing toward robust, sustained volumetric growth and upward pressure on long-term revenue.
Large-scale capital investments-such as the Ready Wyoming transmission expansion, Lange II natural gas generation, and Colorado Clean Energy Plan renewables projects-are expected to materially expand Black Hills' regulated rate base, enabling predictable, above-sector-average long-term earnings and net margins through constructive rate recovery mechanisms and innovative tariffs.
Successful execution of regulatory strategies-including frequent, constructive rate reviews and timely rider mechanisms-has ensured rapid recovery of over $1.3B in recent system investments and will continue supporting cash flow stability and net margin expansion as capital projects ramp over the next several years.
Tech-driven industrial load, specifically from major customers like Microsoft and Meta, is forecast to contribute over 10% of total EPS by 2028, and new load agreements (including those not yet in current five-year forecasts) offer upside, underpinning long-term EPS and revenue growth potential above current conservative financial guidance.
The combination of grid modernization, enhanced resiliency initiatives, and the ability to attract tech customers in regulated territories positions Black Hills to benefit from sustainable financing advantages, potentially lowering capital costs and further improving capital efficiency and future earnings generation.

Black Hills Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Black Hills's revenue will grow by 10.3% annually over the next 3 years.
Analysts assume that profit margins will shrink from 12.7% today to 12.5% in 3 years time.
Analysts expect earnings to reach $375.9 million (and earnings per share of $4.74) by about September 2028, up from $284.2 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.9x on those 2028 earnings, up from 15.0x today. This future PE is lower than the current PE for the US Integrated Utilities industry at 19.7x.
Analysts expect the number of shares outstanding to grow by 1.79% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Black Hills Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Heavy capital expenditure requirements for infrastructure projects (e.g., Ready Wyoming transmission expansion, Lange II generation, Colorado Clean Energy Plan) create ongoing pressure on cash flows, and if regulatory recovery lags or costs overrun, this could compress net margins and limit earnings growth.
Significant projected revenue growth relies on continued ramp-up of large, concentrated, and potentially volatile data center and blockchain load, exposing Black Hills to demand risk if these customers delay, cancel, or reduce commitments, directly impacting revenues and future earnings.
The company's core dependence on regulated natural gas operations and geographic concentration in the Mountain West and Midwest makes Black Hills vulnerable to asset stranding, tightening emissions regulation, or region-specific economic/demographic stagnation, potentially affecting long-term revenue and net earnings.
If distributed energy resources (DERs), renewables, and battery storage adoption accelerate more rapidly than Black Hills anticipates, traditional load growth could be undermined, eroding revenue streams and increasing the risk of under-recovery of fixed costs over the long-term.
Rising frequency and severity of extreme weather events (e.g., wildfires), even with mitigation programs, may drive up insurance premiums, O&M expenses, and reliability investments, pressuring operating costs and potentially reducing net margins over time.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $68.5 for Black Hills based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $76.0, and the most bearish reporting a price target of just $64.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.0 billion, earnings will come to $375.9 million, and it would be trading on a PE ratio of 16.9x, assuming you use a discount rate of 6.8%.
Given the current share price of $58.65, the analyst price target of $68.5 is 14.4% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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