How will the new Idaho rates affecting AVA's 2025 and 2026 earnings forecasts influence the stock valuation?

The settlement means that Avista (NYSE AVA) now has two ratemaking cycles baked in – Sept 1 2025 and Sept 1 2026 – with the new Idaho rates already approved. Assuming the rates are higher (the typical direction of a “all‑party, all‑issues” settlement) the company can now lock in a lift to regulated revenue and cash flow for the next two fiscal years. Analysts will therefore raise the 2025‑26 earnings forecasts, which boosts the utility’s normalized EPS and improves the FCF‑to‑debt coverage ratio. In a sector where valuation is still driven by earnings yield (P/E ≈ 12‑15×) and dividend‑adjusted returns, a 5‑8 % earnings bump can translate into a 2‑3 % price re‑rating even before the next earnings release, because the implied terminal growth rate in discounted‑cash‑flow models rises modestly with the higher rate base.

From a technical standpoint, AVA has been hovering near a flat‑top pattern around $56‑$62 for the past three months, with relatively thin volume. The news clearance typically triggers a breakout on the upside; we’ve already seen a 1‑2 % pre‑market uptick on the news, and a burst of volume could push the share above the $62 resistance, opening the path toward the $66‑$70 range (≈ 3‑4 % upside). Conversely, a pull‑back toward the $58‑$59 support level could be an entry for a low‑risk, price‑reversion play if the market over‑reacts and undervalues the upgraded earnings outlook.

Actionable takeaways
1. Short‑term – If AVA’s price remains flat or slides below $58 on the settlement news, consider a buy‑the‑dip position with a stop just below $56, targeting the $66‑$70 upside as the March‑June 2025 earnings come out.

2. Medium‑term – Update the earnings model to reflect the higher Idaho rates; a 10‑15 % earnings boost could warrant a re‑rating of the fair‑value target to around $68‑$72, assuming the dividend payout stays unchanged.

3. Risk management – Keep an eye on broader utility sentiment (interest‑rate moves, inflation‑linked cost recovery) and any forward‑looking commentary from the May 2025 earnings call that could refine the rate impact on net‑income. A down‑side breakout below $56 would signal that the market is pricing in a possible rate‑cap hold‑back or higher cost pass‑through, suggesting a reduced allocation or hedging with put options until clarification arrives.