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Atco Ltd. (TSE:ACO.Y)
:ACO.Y
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ATCO
(OTC:ACO.Y)
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Rating:73Outperform
Price Target:
C$58.00
▲(4.96% Upside)
ATCO's overall stock score is driven by strong technical indicators and a positive earnings call, highlighting growth and strategic expansions. However, financial performance is moderated by high leverage and declining free cash flow, and valuation concerns persist due to market undervaluation of ATCO Structures.
ATCO (ACO.Y) vs. iShares MSCI Canada ETF (EWC)
Market Cap
C$6.04B
Dividend Yield3.31%
Average Volume (3M)206.00
Price to Earnings (P/E)15.5
Beta (1Y)-0.02
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. Volume268
30 Day Avg. Volume206
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 CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price TargetN/A
Price Target UpsideN/A
Rating ConsensusN/A
Number of Analyst Covering0
ATCO Business Overview & Revenue Model
Company DescriptionATCO Ltd. (ACO.Y) is a diversified Canadian corporation primarily engaged in the utilities, energy, and logistics sectors. It operates through various segments including Structures & Logistics, Utilities, and Energy, providing a wide range of products and services such as modular buildings, natural gas distribution, and renewable energy solutions. ATCO is committed to sustainability and innovation, positioning itself as a leader in providing infrastructure solutions across North America and internationally.
How the Company Makes MoneyATCO generates revenue through multiple key streams. The Structures & Logistics segment earns money by providing modular buildings, workforce housing, and logistics services primarily to the resource and construction sectors. The Utilities segment, which includes ATCO Gas, ATCO Electric, and ATCO Water, generates revenue through regulated utility services, receiving stable returns from the distribution of natural gas and electricity. The Energy segment contributes through natural gas production, power generation, and renewable energy projects, capitalizing on the growing demand for clean energy solutions. Additionally, ATCO benefits from long-term contracts and partnerships with various industries, which provide a steady income stream and enhance its market presence, particularly in projects related to infrastructure and energy transition.
ATCO Earnings Call Summary
Earnings Call Date:Jul 31, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Nov 07, 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
55.26
Price Trends
52.32
Positive
52.27
Positive
50.72
Positive
Market Momentum
1.90
Negative
71.99
Negative
98.05
Negative
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 55.26 is above the 20-day moving average (MA) of 54.38, above the 50-day MA of 52.32, and above the 200-day MA of 50.72, indicating a bullish trend. The MACD of 1.90 indicates Negative momentum. The RSI at 71.99 is Negative, neither overbought nor oversold. The STOCH value of 98.05 is Negative, 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 |
|---|---|---|---|---|---|---|---|
| ― | C$6.04B | 15.47 | 9.27% | 3.31% | 7.64% | 14.22% | |
| ― | $6.70B | ― | -1.19% | 4.83% | -8.39% | -180.67% | |
| ― | $19.96B | 22.63 | 7.12% | 5.13% | 10.65% | 14.09% | |
| ― | C$10.80B | 24.20 | 7.52% | 4.52% | -0.51% | -17.17% | |
| ― | $17.65B | 18.10 | 5.60% | 3.62% | 6.62% | 11.55% | |
| ― | $8.02B | ― | ― | 4.87% | 14.59% | -202.66% | |
| ― | $6.01B | ― | 1.50% | 4.67% | -6.96% | -1235.30% |
* Utilities Sector Average
TSE:ACO.Y
ATCO
60.50
13.27
28.09%
TSE:CU
Canadian Utilities A
39.28
5.81
17.36%
TSE:AQN
Algonquin Power & Utilities
7.83
1.59
25.42%
TSE:NPI
Northland Power
25.63
5.53
27.52%
TSE:EMA
Emera
66.68
18.50
38.40%
TSE:BIPC
Brookfield Infrastructure
63.55
9.07
16.65%
ATCO Corporate Events
ATCO Ltd. Reports Strong Q2 2025 Earnings Growth
Aug 1, 2025
ATCO Ltd. is a diversified global company based in Calgary, Alberta, providing essential services and products in energy, housing, and transportation sectors, with a notable presence in modular construction and energy systems.
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.