What happened
Shares of energy company Algonquin Power & Utilities (AQN 1.39%) fell as much as 19.5% in trading on Friday after the company reported third-quarter 2022 financial results. Shares are down 18.7% as of 12:30 p.m. ET and show no signs of bouncing off today's lows.
So what
Revenue was up 26% in the quarter to $666.7 million, and net loss ballooned to $195.2 million, or $0.29 per share. Adjusted net earnings fell 25% to $73.5 million, or $0.11 per share.
Analysts were expecting revenue of $594.8 million and earnings of $0.17 per share, so the top line was better than expected, and the disappointing bottom line is what investors were disappointed by. Management said that higher interest payments and a reduction in tax subsidies were the reason for the shortfall.
Now what
Energy companies will be dealing with rising rates over the next year as debt costs adjust and some have to refinance some of their old debt. That will likely put pressure on margins, no matter what part of the energy market you're in.
Algonquin's management also said they're also getting closer to closing the Kentucky Power acquisition, which will bring a regulated utility to the mix.
Utilities will eventually be able to raise rates as interest rates rise and they're forced to increase their expected return, but the process can take time. Algonquin may go through a period of lower earnings as a result, but long term this is a great energy company that will benefit from a transition to cleaner energy sources.
