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Home My WebLink AboutIDA research note 11-01-11.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. November 1, 2011 IDA * – NYSE Rating: Buy Price: (11/1/11) $39.27 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 3Q’11 Earnings Preview: Special Tax Benefit Will Boost GAAP EPS.  IDACORP, Inc. is scheduled to report 3Q’11 earnings on Thursday, November 3rd before the market opens. A conference call with management will be held on the same day at 1:30 PM PT/4:30 PM ET.  We are looking for continuing EPS of $1.38, down from $1.39 a year ago and below the $1.51 consensus of three analysts. 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 $3.07.  GAAP results to include significant tax benefit. Our forecast excludes the expected impact of significant nonrecurring tax benefits. These benefits are estimated at ~$1.20 per share, and are tied to the U.S. Congress Joint Committee on Taxation’s approval of an agreement reached in September 2010 with the IRS allowing Idaho Power to use the uniform capitalization tax method of accounting. Our 3Q’11 EPS estimate excludes this benefit.  Margin increase was likely offset by higher expenses. Our forecast calls for quarterly gross margin (utility revenues less power supply expenses) of $230.7 million, up 6.9% from $215.8 million a year earlier. It is our expectation that the effects of higher operating and maintenance expenses and a ~4% increase in outstanding shares were enough to offset the increase in margin on an EPS basis. Weather likely provided additional benefits to results, as cooling degree days in 3Q’11 were higher than 3Q’10 in the Boise area.  Conference call expectations. The utility will likely comment on the progress of its ongoing rate case in Oregon, as well as some discussion about the settlement reached in September for its Idaho rate case. We will also be listening for more information about how and when the utility will pursue the addition of the Langley Gulch plant into rate base (assuming the utility receives accommodative regulatory treatment of its request, it should be able to begin recording earnings tied to the asset when the facility is placed into service in 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 9/30/11) Buy Hold Sell Corresponding Institutional Research Ratings Buy Neutral Underperform and Distribution 58% 39% 3% Corresponding Individual Investor Group Ratings Outperform Market Perform Underperform and Distribution 53% 47% 0% Distribution of Combined Ratings 57% 40% 3% Distribution of companies from whom D.A. Davidson & Co. has received compensation for investment banking services in last 12 mos. Institutional Coverage 4% 3% 0% Individual Investor Group Coverage 0% 6% 0% Distribution of Combined Investment Banking 3% 3% 0% 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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