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Home My WebLink About2011 IDA research note 08-01-11.pdf Please refer to pages 2-3 of this report for detailed disclosure and certification information. * D. A. Davidson & Co. makes a market in this security. RESEARCH NOTE Institutional Equity Research IDACORP, INC. August 1, 2011 IDA * – NYSE Rating: Buy Price: (8/1/11) $39.21 Price Targets: 12-18 month: $44.50 5-year: $50.00 Industry: Utilities James L. Bellessa, Jr., CFA 406.791.7230 jbellessa@dadco.com Michael Bates Research Associate 406.791.7216 mbates@dadco.com 2Q Preview: Hydro and Weather Benefits Should Produce Strong Comp • IDACORP, Inc. is scheduled to report 2Q’11 earnings on Thursday, August 4th before the market opens. A conference call with management will be held on the same day at 4:30 PM ET/1:30 PM PT. • We are looking for EPS of $0.59, down from $0.82 a year ago and matching the Street consensus. However, the year-over-year comparison from ongoing earnings should be quite favorable. GAAP EPS in 2Q’10 included the $0.47 per share impact of nonrecurring items. (These items included a tax accounting method change for repair-related expenditures, partially offset by the reversal of benefits tied to the utilization of accumulated deferred investment tax credits (ADITC) earlier that year.) Excluding these items, ongoing EPS in 2Q’10 would have been $0.35. Our full-year 2011 earnings estimate of $2.86 per share compares to management’s guidance range of $2.80-$2.95 and the current consensus of $2.92. • Earnings advance driven at the utility level. Our forecast calls for quarterly gross margin (utility revenues less power supply expenses) of $166.9 million, up 7.8% from $154.8 million a year earlier. Margins were likely boosted as strong hydro conditions in the Northwest likely drove power supply costs lower. Weather likely provided additional benefits to results (heating-degree days in 2Q’11 were 22% colder than normal and 7% colder than 2Q’10), along with an expanded customer base and higher rates in the utility’s Oregon service territory. • Breakeven non-regulated earnings expected. We are forecasting that IDACORP’s non-regulated businesses and holding company will report breakeven results versus a $0.01 per share contribution in 2Q’10, but matching results reported in 1Q’11. • Conference call expectations. As the utility is currently in the midst of new rate case filings in both Idaho and Oregon, the progress of these proceedings will likely be a point of focus on the call. We will also be listening for an update on the construction of the Langley Gulch gas-fired plant, which is scheduled to be operating by mid-2012. • Our 12-18 month price target of $44.50 equates to 15.2x the average of our 2011 and 2012 EPS estimates of $2.86 and $3.00, respectively. We rate the shares BUY. D.A. Davidson & Co. Two Centerpointe Drive, Suite 400 • Lake Oswego, Oregon 97035 • (503) 603-3000 • (800) 755-7848 • www.dadavidson.com Copyright D.A. Davidson & Co., 2011. All rights reserved. 2 Required Disclosures D.A. Davidson & Co. expects to receive, or intends to seek, compensation for investment banking services from this company in the next three months. D.A. Davidson & Co. is a full service investment firm that provides both brokerage and investment banking services. James L. Bellessa, Jr., CFA and Michael Bates, the research analysts principally responsible for the preparation of this report, will receive compensation that is based upon (among other factors) D.A. Davidson & Co.’s investment banking revenue. However, D.A. Davidson & Co.’s analysts are not directly compensated for involvement in specific investment banking transactions. We, James L. Bellessa, Jr., CFA and Michael Bates, attest that (i) all the views expressed in this research report accurately reflect our personal views about the common stock of the subject company, and (ii) no part of our compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Ratings Information D.A. Davidson & Co. Institutional Research Ratings Buy Neutral Underperform Risk adjusted return potential azbycx Over 15% total return expected on a risk adjusted basis over next 12-18 months >0-15% return potential on a risk adjusted basis over next 12-18 months Likely to remain flat or lose value on a risk adjusted basis over next 12-18 months Distribution of Ratings (as of 6/30/11) Buy Hold Sell Corresponding Institutional Research Ratings Buy Neutral Underperform and Distribution 56% 40% 4% Corresponding Individual Investor Group Ratings Outperform Market Perform Underperform and Distribution 62% 38% 0% Distribution of Combined Ratings 56% 40% 4% Distribution of companies from whom D.A. Davidson & Co. has received compensation for investment banking services in last 12 mos. Institutional Coverage 4% 2% 10% Individual Investor Group Coverage 0% 10% 0% Distribution of Combined Investment Banking 4% 3% 10% D.A. Davidson & Co.’s Institutional Research Rating Scale (maintained since 7/9/02): Buy, Neutral, Underperform D.A. Davidson & Co. Two Centerpointe Drive, Suite 400 • Lake Oswego, Oregon 97035 • (503) 603-3000 • (800) 755-7848 • www.dadavidson.com Copyright D.A. Davidson & Co., 2011. All rights reserved. 3 Target prices are our Institutional Research Department’s evaluation of price potential over the next 12-18 months and 5 years, based upon our assessment of future earnings and cash flow, comparable company valuations, growth prospects and other financial criteria. Certain risks may impede achievement of these price targets including, but not limited to, broader market and macroeconomic fluctuations and unforeseen changes in the subject company’s fundamentals or business trends. Other Disclosures Information contained herein has been obtained by sources we consider reliable, but is not guaranteed and we are not soliciting any action based upon it. 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