Hannon Armstrong Has A Clear Runway To Earnings Growth

UBS' Julien Dumoulin-Smith raised price target on Hannon Armstrong Sustnbl Infrstr Cap Inc HASI to $27 from $22 on clear path for strong earnings growth.

The analyst's price target is based on a $1.40 dividend in 2017 and a yield requirement of 5.2 percent, which represents a 100 bps premium to the average YieldCo dividend yield. UBS noted potential for multiple improvement on model predictability.

The brokerage, which reiterated its Buy rating on the stock, said its bullish stance is based on "earnings clarity into 2017, readily achievable guidance, and a substantially more resilient model to originations than renewable peers."

"We see HASI as among the most defensive plays in the wider YieldCo space, given not only debt amortization, and established ongoing access to a wide variety of principally industrial companies for financial product," Dumoulin-Smith wrote in a note.

"The company's securitization platform and access to capital markets provide capacity ample capacity to execute on its $2.5B investment pipeline to drive earnings growth," Dumoulin-Smith continued.

The analyst noted that the key question for the company remains how much further it will grow originations beyond its $1 billion size, and any corresponding double-digit EPS growth.

"Through the medium-term, we see simply raising leverage to its stated target of 2.5:1 as a largely enabling execution of its EPS growth," the analyst added.

At time of writing, shares of Hannon Armstrong fell 1.65 percent to $22.72.