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ATCO (TSE:ACO.Y)
TSX:ACO.Y
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ATCO
(TSX:ACO.Y)
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Rating:73Outperform
Price Target:
C$58.00
▲(12.19% Upside)
ATCO's overall score is driven by strong earnings growth and strategic expansions, particularly in ATCO Structures, as highlighted in the earnings call. The company's attractive valuation with a solid dividend yield further supports the score. However, financial risks due to high leverage and declining free cash flow, along with market undervaluation concerns, moderate the overall assessment.
ATCO (ACO.Y) vs. iShares MSCI Canada ETF (EWC)
Market Cap
$5.71B
Dividend Yield3.87%
Average Volume (3M)492.00
Price to Earnings (P/E)13.2
Beta (1Y)0.05
Revenue Growth7.64%
EPS Growth14.22%
CountryCA
Employees20,582
SectorUtilities
Sector Strength65
IndustryDiversified Utilities
Share Statistics
EPS (TTM)0.90
Shares Outstanding12,424,987
10 Day Avg. Volume102
30 Day Avg. Volume492
Financial Highlights & Ratios
PEG Ratio47.41
Price to Book (P/B)1.15
Price to Sales (P/S)1.08
P/FCF Ratio13.58
Enterprise Value/Market Cap3.77
Enterprise Value/Revenue4.24
Enterprise Value/Gross Profit6.82
Enterprise Value/Ebitda10.78
Forecast
1Y Price Target
$58.00Price Target Upside12.19% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering0
ATCO Business Overview & Revenue Model
Company DescriptionATCO Ltd., together with its subsidiaries, engages in the provision of housing, logistics and transportation, agriculture, water, real estate, and energy and energy infrastructure solutions in Canada, Australia, and internationally. The company offers workforce and residential housing, modular facilities, construction and site support, workforce lodging, facility operations and maintenance, defense operations, and disaster and emergency management services. It also provides commercial real estate services, including sale, lease, and development of commercial and industrial properties; and engages in processing and marketing of fly ash. In addition, it generates electricity through hydro, solar, wind, and natural gas facilities, as well as provides electricity distribution, transmission, storage, and related infrastructure services; offers natural gas transmission, distribution, storage, and retail sales; natural gas liquids storage services; and provides integrated water services, including pipeline transportation, storage, water treatment, recycling, and disposal to various industrial customers. ATCO Ltd. was founded in 1947 and is headquartered in Calgary, Canada. ATCO Ltd. operates as a subsidiary of Sentgraf Enterprises Ltd.
How the Company Makes MoneyATCO makes money through several key revenue streams across its diverse business segments. The utilities segment, which includes electricity and natural gas distribution, is a significant contributor to its revenue, benefiting from regulated rates that provide stable and predictable income. ATCO also generates revenue from its energy infrastructure operations, including electricity generation and transmission, and natural gas storage and industrial water solutions, which are often supported by long-term contracts. The structures and logistics segment offers modular construction solutions and workforce housing, serving industries such as energy, mining, and infrastructure development, which contributes to its revenue through contracts for customized solutions. Additionally, the company's diversified operations are supported by strategic partnerships and joint ventures that enhance its market reach and operational capabilities, further contributing to its revenue generation.
ATCO Earnings Call Summary
Earnings Call Date:Jul 31, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Oct 23, 2025
Earnings Call Sentiment Positive
The earnings call reflected a largely positive outlook with substantial growth in earnings and strategic expansions, particularly in the ATCO Structures segment. However, there are concerns regarding the market undervaluation of ATCO Structures and uncertainties in government contract timelines, which temper the overall enthusiasm.Q2-2025 Updates
Positive Updates
Increased Adjusted Earnings
ATCO achieved adjusted earnings of $101 million or $0.90 per share in Q2 2025, up $5 million compared to the same period in 2024.
Strong Performance in ATCO Structures
ATCO Structures delivered adjusted earnings of $32 million, up $2 million compared to Q2 2024, driven by increased permanent modular construction activity in Canada and increased workforce housing sale activity in Australia and Chile.
Expansion in Rental Fleet and New Manufacturing Facility
ATCO Structures expanded its rental fleet by 54% over five years and added a new manufacturing facility in Brisbane, enhancing capacity to meet demand in Australia.
Growth in ATCO Frontec and Neltume Ports Investment
ATCO Frontec's adjusted earnings grew year-over-year, and Neltume Ports investment delivered adjusted earnings growth of $1 million compared to Q2 2024.
Significant Cash Flow Increase
ATCO's stand-alone businesses reported cash flow from operating activities of $192 million year-to-date, up over 30% compared to the previous year.
Negative Updates
Discount in ATCO Structures' Market Value
ATCO Structures continues to trade at a significant discount compared to peers, which trade at 8 to 10x EBITDA, highlighting a perceived undervaluation in the market.
Uncertainty in Federal Government Contracts
Despite optimism around defense spending and housing initiatives, the timing and realization of these opportunities remain uncertain due to dependency on federal government actions.
Company Guidance
During the ATCO Limited Second Quarter 2025 Results Conference Call, several key financial metrics were highlighted. The company reported adjusted earnings of $101 million or $0.90 per share for the quarter, marking a $5 million increase from the same period in 2024. ATCO Structures delivered adjusted earnings of $32 million, up by $2 million from the previous year, with an adjusted EBITDA of $70 million. The company's cash flow from operating activities for ATCO stand-alone businesses was reported at $192 million year-to-date, reflecting a growth of over 30% compared to the previous year. Capital expenditures for the ATCO stand-alone businesses reached $117 million year-to-date, representing a $43 million increase year-over-year, primarily due to enhanced capital spending on rental fleet additions in the United States. Additionally, Neltume Ports, part of ATCO Investments, saw a $1 million growth in adjusted earnings compared to Q2 2024, with a notable development being the commencement of construction on the Vancouver Bulk Terminal.ATCO Financial Statement Overview
Summary
ATCO shows strong revenue growth and operational efficiency, with a TTM revenue growth rate of 9.15% and high gross and EBIT margins. However, the high debt-to-equity ratio and declining free cash flow are concerns that need addressing to improve financial stability.Income Statement
ATCO's income statement shows a consistent revenue growth trend with a TTM growth rate of 9.15%. The company maintains strong gross and EBIT margins at 62.11% and 29.06% respectively, indicating efficient cost management and operational profitability. However, the net profit margin is relatively modest at 8.65%, suggesting room for improvement in net earnings efficiency.75
Positive
Balance Sheet
The balance sheet reveals a high debt-to-equity ratio of 2.58, indicating significant leverage which could pose financial risks. However, the return on equity remains stable at 9.45%, reflecting effective use of equity to generate profits. The equity ratio is moderate, suggesting a balanced asset structure.65
Positive
Cash Flow
Cash flow analysis shows a decline in free cash flow growth by 25.46% in the TTM, which is a concern. The operating cash flow to net income ratio is healthy at 2.07, indicating strong cash generation relative to net income. However, the free cash flow to net income ratio is low at 15.45%, suggesting limited cash available after capital expenditures.60
Neutral
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 5.08B | 4.94B | 4.74B | 4.98B | 4.29B | 3.94B |
| Gross Profit | 3.15B | 3.11B | 3.03B | 3.12B | 2.72B | 2.59B |
| EBITDA | 2.00B | 1.94B | 1.95B | 2.03B | 1.62B | 1.62B |
| Net Income | 439.00M | 430.00M | 432.00M | 370.00M | 246.00M | 252.00M |
Balance Sheet | ||||||
| Total Assets | 26.80B | 26.72B | 25.36B | 24.14B | 23.00B | 22.20B |
| Cash, Cash Equivalents and Short-Term Investments | 785.00M | 713.00M | 592.00M | 1.03B | 1.09B | 1.10B |
| Total Debt | 12.20B | 11.98B | 11.17B | 10.20B | 10.15B | 9.72B |
| Total Liabilities | 17.95B | 18.01B | 16.86B | 15.79B | 15.05B | 14.35B |
| Stockholders Equity | 4.73B | 4.63B | 4.42B | 4.38B | 4.11B | 4.05B |
Cash Flow | ||||||
| Free Cash Flow | -55.00M | -27.00M | 57.00M | 535.00M | 263.00M | 490.00M |
| Operating Cash Flow | 1.81B | 1.66B | 1.48B | 1.97B | 1.46B | 1.43B |
| Investing Cash Flow | -1.95B | -1.80B | -2.58B | -1.50B | -1.38B | -1.06B |
| Financing Cash Flow | 301.00M | -55.00M | 362.00M | -527.00M | -85.00M | -410.00M |
ATCO Technical Analysis
Positive
51.70
Price Trends
51.43
Positive
51.80
Negative
50.04
Positive
Market Momentum
0.14
Negative
53.64
Neutral
77.71
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:ACO.Y, the sentiment is Positive. The current price of 51.7 is above the 20-day moving average (MA) of 50.74, above the 50-day MA of 51.43, and above the 200-day MA of 50.04, indicating a bullish trend. The MACD of 0.14 indicates Negative momentum. The RSI at 53.64 is Neutral, neither overbought nor oversold. The STOCH value of 77.71 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:ACO.Y.
ATCO Peers Comparison
UnderperformOutperform
Sector (66)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | $5.71B | 13.22 | 9.27% | 3.87% | 7.64% | 14.22% | |
67 Neutral | $19.99B | 22.67 | 7.12% | 5.50% | 10.65% | 14.09% | |
66 Neutral | C$7.98B | 23.67 | 7.52% | 4.70% | -0.51% | -17.17% | |
66 Neutral | $17.65B | 18.10 | 5.60% | 3.62% | 6.62% | 11.55% | |
62 Neutral | $6.38B | 22.11 | -1.19% | 5.07% | -8.39% | -180.67% | |
56 Neutral | C$7.94B | ― | 89.66% | 5.14% | 14.59% | -202.66% | |
50 Neutral | $6.21B | ― | 1.50% | 4.53% | -6.96% | -1235.30% |
* Utilities Sector Average
TSE:ACO.Y
ATCO
51.70
3.09
6.36%
TSE:CU
Canadian Utilities A
38.87
5.29
15.75%
TSE:AQN
Algonquin Power & Utilities
8.08
1.39
20.78%
TSE:NPI
Northland Power
24.39
3.72
18.01%
TSE:EMA
Emera
66.80
19.67
41.74%
TSE:BIPC
Brookfield Infrastructure
60.13
5.71
10.48%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.