The stock of the holdings company, which is engaged in the electric transmission operations of its regulated operating subsidiaries, has "moved too far too fast," analysts said.
"ITC is up over 12% in two weeks, leading the utility rally and leaving little headroom for value-conscious investors," analysts said, adding "Close to $40 we see ITC ahead of itself on risk/reward around return on equity, particularly with mark-to-market [fair value] of the Federal Energy Regulatory Commission's (FERC) methodology pointing to 10.3% versus the 11% we model for ITC."
Additionally, on Thursday's earnings call, CEO Welch acknowledged that implementation of FERC orders and related requests for proposal were proceeding slower than ITC had hoped at the regional transmission organizations, demonstrating that realization of projects appears to be longer-dated, analysts said.
Separately, TheStreet Ratings team rates ITC HOLDINGS CORP as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate ITC HOLDINGS CORP (ITC) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins, good cash flow from operations and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ITC's revenue growth has slightly outpaced the industry average of 5.3%. Since the same quarter one year prior, revenues rose by 13.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- ITC HOLDINGS CORP has improved earnings per share by 25.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ITC HOLDINGS CORP increased its bottom line by earning $1.47 versus $1.20 in the prior year. This year, the market expects an improvement in earnings ($1.88 versus $1.47).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Electric Utilities industry average. The net income increased by 25.2% when compared to the same quarter one year prior, rising from $58.98 million to $73.87 million.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Electric Utilities industry and the overall market, ITC HOLDINGS CORP's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for ITC HOLDINGS CORP is currently very high, coming in at 71.47%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.34% significantly outperformed against the industry average.
- You can view the full analysis from the report here: ITC Ratings Report