Alliant Registers Strong 2022 Performance

We are maintaining our $58 fair value estimate for Alliant Energy LNT after the company reported 2022 earnings per share of $2.73, up 6% from 2021. Management reaffirmed its 2023 EPS guidance of $2.82-$2.96, in line with our expectations. Our narrow moat and stable moat trend ratings are unchanged.

Alliant is one of the cheapest U.S. utilities in our coverage, albeit trading only 9% below our fair value estimate. It is one of only four utilities trading in 4-star territory. The stock is down 17% from its 2022 high. We think the combination of a 3.4% dividend yield and our outlook for 7% earnings growth represents one of the best total-return opportunities in the sector.

We think the market is worried about Alliant’s plans to file a rate case later this year in Wisconsin. Despite concerns raised by stakeholders about peer WEC Energy’s rate case, the ultimate outcome supported our view that Wisconsin remains one of the best regulatory environments for utilities. We expect a similarly constructive outcome. In Iowa, Alliant continues to seek advanced ratemaking for its investments in 400 megawatts of solar and 75 MW of battery storage.

Alliant remains one of the best-positioned utilities to benefit from the Inflation Reduction Act. The company’s $8.5 billion capital investment plan for 2023-26 is a $2.4 billion increase from the previous plan, supporting 8% rate base growth. The act supports a sizable increase in Alliant’s renewable energy growth ambitions while reducing customer costs. Transferability of tax credits should increase cash flow, and full utility project ownership should support incremental utility rate base growth. Alliant is too small to be subject to the Inflation Reduction Act’s corporate minimum tax. This drives our expectation for the company to deliver on the top end of management’s 5%-7% long-term earnings growth target.