ATCO (ACO.Y) AI Stock Analysis

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ATCO

(TSX:ACO.Y)

Rating:76Outperform

Price Target:

C$59.00

▲(8.56%Upside)

ATCO Ltd. scores well due to its strong financial performance, solid technical indicators, and positive earnings call sentiment. Its valuation remains attractive, offering a good balance of growth and income potential. The primary risk lies in its high leverage, but the company’s strategic expansions and cash flow strength provide confidence in its future prospects.

ATCO (ACO.Y) vs. iShares MSCI Canada ETF (EWC)

Market Cap

$5.78B

Dividend Yield5.08%

Average Volume (3M)301.00

Price to Earnings (P/E)14.3

Beta (1Y)0.46

Revenue Growth6.84%

EPS Growth4.03%

CountryCA

Employees20,582

SectorUtilities

Sector Strength75

IndustryDiversified Utilities

Share Statistics

EPS (TTM)1.42

Shares Outstanding12,424,987

10 Day Avg. Volume231

30 Day Avg. Volume301

Financial Highlights & Ratios

PEG Ratio0.25

Price to Book (P/B)1.05

Price to Sales (P/S)0.00

P/FCF Ratio5.67

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$59.37

Price Target Upside9.23% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering1

ATCO Business Overview & Revenue Model

Company DescriptionATCO Ltd. (ACO.Y) is a diversified global corporation headquartered in Calgary, Alberta, Canada. It operates in various sectors, including utilities, energy, structures and logistics, and transportation. The company provides a wide range of services and solutions such as electricity and natural gas transmission and distribution, modular structures, and logistics support. ATCO aims to deliver sustainable and innovative solutions for its clients across different industries worldwide.

How the Company Makes MoneyATCO makes money primarily through its diverse portfolio of businesses, which are organized into several key segments. The Utilities segment generates revenue by providing electricity and natural gas distribution services, where customers are typically billed based on usage and regulated rates. The Structures and Logistics segment earns income by designing, manufacturing, and leasing modular structures for various applications, including workforce housing and office space, often under long-term contracts. Additionally, the Energy Infrastructure segment contributes to revenue through the development, operation, and maintenance of energy assets such as power plants. ATCO also engages in transportation services, offering rail and freight solutions. The company's earnings are further supported by strategic partnerships and joint ventures that enhance its market presence and operational capabilities.

ATCO Earnings Call Summary

Earnings Call Date:May 07, 2025

(Q1-2025)

% Change Since: 2.55%|

Next Earnings Date:Jul 24, 2025

Earnings Call Sentiment Positive

The earnings call reflects a positive overall sentiment, with strong financial performance and growth across multiple segments, including ATCO Structures and ATCO Investments. Despite some regulatory headwinds and minor impacts from tariffs, the company's robust cash flow and strategic expansions indicate confidence in future growth.

Q1-2025 Updates

Positive Updates

Strong Start to 2025

ATCO achieved adjusted earnings of $160 million in Q1 2025, an 8% increase from the previous year, driven by increased activity at ATCO Structures and growth in rate base and cost efficiencies at ATCO Energy Systems.

ATCO Structures Growth

ATCO Structures delivered adjusted earnings of $26 million in Q1 2025, marking the 11th consecutive quarter of year-over-year growth, with a $2 million increase from the prior year due to workforce housing sales in Australia.

Successful ATCO Investments Segment

The newly created ATCO Investments segment saw growth, with Neltume Ports delivering $3 million in adjusted earnings growth due to improved cargo mix and margins.

Cash Flow Growth

ATCO businesses reported cash flow from operating activities of $120 million in Q1, up from $52 million in the prior year, driven by timing and focus on efficiencies.

Expansion and Strategic Investments

ATCO Structures expanded its manufacturing and operations in Adelaide, South Australia, and continues to invest in market share and expansion strategy in Canada, the US, and Australia.

Negative Updates

Regulatory Headwinds in Canadian Utilities

Canadian Utilities faced a decrease in allowable ROE from 9.28% in 2024 to 8.97% in 2025, and the end of a 50 basis point efficiency carryover mechanism.

Impact of Tariffs

ATCO Structures faced slight margin impacts due to tariffs on appliances and other goods imported from the US, with minor effects on North American operations.

Company Guidance

During the first quarter of fiscal year 2025, ATCO Ltd. reported adjusted earnings of $160 million, marking an 8% increase from the previous year. The growth was attributed to increased activity in ATCO Structures, rate base growth and cost efficiencies at ATCO Energy Systems, stronger seasonal spreads in natural gas storage at ATCO EnPower, and contributions from the newly created ATCO Investments segment. Canadian Utilities experienced earnings growth driven by rate base increases despite an ROE reset from 9.28% to 8.97% and the end of a 50 basis point efficiency carryover mechanism. ATCO Structures reported adjusted earnings of $26 million, bolstered by workforce housing activity in Australia. The ATCO Investments segment saw growth from its 40% equity investment in Neltume Ports and the acquisition of ATCO Energy. Operating cash flow from ATCO's stand-alone businesses was $120 million, up from $52 million in the previous year, supporting the company’s operations and capital program. ATCO’s strategic focus includes organic capital investment funded by internally generated cash flow, with future growth expected from segments like ATCO Investments and Structures & Logistics.

ATCO Financial Statement Overview

Summary

ATCO exhibits solid financial health with strong revenue generation and operational efficiency. However, high leverage and fluctuating net income margins present potential risks. The company's ability to generate cash flow is a strength, but managing free cash flow growth remains a challenge. Overall, ATCO is positioned well within the diversified utilities industry, with room to enhance its financial stability and profitability further.

Income Statement

Positive

ATCO has demonstrated stable revenue growth with the TTM showing a modest increase in total revenue. The gross profit margin remains strong, although the net profit margin has seen some fluctuations due to variations in net income. The EBIT and EBITDA margins are robust, indicating efficient operations, but the decline in net income in recent periods requires attention.

Balance Sheet

Positive

The balance sheet shows a high debt-to-equity ratio, suggesting significant leverage. However, the company maintains a stable equity ratio, and the return on equity remains positive. The increase in total assets and stockholders' equity over time provides a cushion against liabilities, although high debt levels could pose risks if not managed carefully.

Cash Flow

Positive

ATCO's cash flow statements reveal a healthy operating cash flow that consistently exceeds net income, reflecting strong operational cash generation. However, free cash flow growth has been inconsistent, with recent periods showing a decline. The free cash flow to net income ratio indicates room for improvement in cash flow management relative to profitability.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	5.03B	4.94B	4.74B	4.98B	4.29B	3.94B
Gross Profit	3.14B	3.11B	3.03B	3.12B	2.72B	2.59B
EBITDA	2.21B	2.26B	2.27B	1.97B	1.76B	1.75B
Net Income	427.00M	430.00M	432.00M	707.00M	246.00M	497.00M
Balance Sheet
Total Assets	27.10B	26.72B	25.36B	24.14B	23.00B	22.20B
Cash, Cash Equivalents and Short-Term Investments	957.00M	703.00M	576.00M	1.03B	1.07B	1.06B
Total Debt	12.19B	11.98B	11.17B	10.20B	10.15B	9.72B
Total Liabilities	18.25B	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	487.00M	393.00M	400.00M	813.00M	518.00M	815.00M
Operating Cash Flow	2.40B	2.20B	1.97B	2.40B	1.86B	1.84B
Investing Cash Flow	-1.85B	-1.80B	-2.58B	-1.50B	-1.38B	-1.06B
Financing Cash Flow	-500.00M	-588.00M	-123.00M	-953.00M	-486.00M	-823.00M

ATCO Technical Analysis

Technical Analysis Sentiment

Positive

Last Price54.35

Price Trends

50DMA

52.48

Positive

100DMA

50.40

Positive

200DMA

49.06

Positive

Market Momentum

MACD

0.39

Negative

RSI

61.87

Neutral

STOCH

40.34

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 54.35 is above the 20-day moving average (MA) of 52.82, above the 50-day MA of 52.48, and above the 200-day MA of 49.06, indicating a bullish trend. The MACD of 0.39 indicates Negative momentum. The RSI at 61.87 is Neutral, neither overbought nor oversold. The STOCH value of 40.34 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

Overall Rating

UnderperformOutperform

Sector (67)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ACO.Y	76 Outperform	$5.78B	14.29	9.23%	5.08%	6.84%	4.03%
NPI	72 Outperform	$5.65B	21.70	6.08%	5.55%	-5.33%	―
EMA	72 Outperform	$18.27B	20.84	7.12%	6.41%	8.17%	31.60%
CU	72 Outperform	C$7.74B	25.81	6.76%	6.66%	-0.53%	-31.77%
Sector *	67 Neutral	$16.29B	16.86	4.63%	3.62%	4.77%	6.10%
BIPC	65 Neutral	$7.42B	―	89.66%	5.80%	30.87%	-157.95%
AQN	56 Neutral	$5.97B	―	5.54%	4.81%	-4.74%	-213.24%

* Utilities Sector Average

Performance Comparison

TSE:ACO.Y

ATCO

54.35

13.99

34.68%

TSE:NPI

Northland Power

21.69

-0.57

-2.55%

TSE:AQN

Algonquin Power & Utilities

7.79

0.06

0.79%

TSE:EMA

Emera

61.12

17.33

39.58%

TSE:CU

Canadian Utilities A

37.55

9.17

32.31%

TSE:BIPC

Brookfield Infrastructure

56.28

12.07

27.30%

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.Date of analysis: May 17, 2025