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Canadian Utilities A (TSE:CU)
TSX:CU
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Canadian Utilities A
(TSX:CU)
70Neutral
Positive Factors
Earnings
Q4/24 adjusted EPS of $0.74 surpassed consensus estimates of $0.72, aided by better performance from ATCO Energy Systems and reduced corporate expenses.
Investment Programs
Introduction of ATCO Energy Systems' 2025-2027 capital expenditure program of $5.8 billion suggests a compound annual growth rate of approximately 5.4%.
Negative Factors
Earnings Outlook
Comments during the call suggested that Alberta utility earnings will moderate, overshadowing the 3% EPS beat and positive revision to rate base growth.
Market Performance
CU shares underperformed, declining by 2% compared to utility peers which remained flat.
Canadian Utilities A (CU) vs. S&P 500 (SPY)
Market Cap
C$7.71B
Dividend Yield4.81%
Average Volume (3M)645.54K
Price to Earnings (P/E)25.3
Beta (1Y)0.55
Revenue Growth-1.42%
EPS Growth-36.31%
CountryCA
Employees9,084
SectorUtilities
Sector Strength87
IndustryDiversified Utilities
Share Statistics
EPS (TTM)1.49
Shares Outstanding204,968,490
10 Day Avg. Volume511,889
30 Day Avg. Volume645,542
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.00
Price to Cash Flow (P/CF)0.00
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$39.00Price Target Upside3.72% Upside
Rating ConsensusHold
Number of Analyst Covering5
Canadian Utilities A Business Overview & Revenue Model
Company DescriptionCanadian Utilities Limited and its subsidiaries engage in the electricity, natural gas, and retail energy businesses worldwide. It operates through Utilities, Energy Infrastructure, and Corporate & Other segments. The Utilities segment provides regulated electricity transmission and distribution services in northern and central east Alberta, the Yukon, and the Northwest Territories; and integrated natural gas transmission and distribution services in Alberta, the Lloydminster area of Saskatchewan, and Western Australia. It owns and operates approximately 9,000 kilometers of natural gas pipelines, 16 compressor sites, approximately 3,700 receipt and delivery points, and a salt cavern storage peaking facility located near Fort Saskatchewan, Alberta in Canada. The Energy Infrastructure segment provides electricity generation, natural gas storage, industrial water, and related infrastructure development solutions in Alberta, the Yukon, the Northwest Territories, Australia, Mexico, and Chile. The Corporate & Other segment retails electricity and natural gas business in Alberta. The company was incorporated in 1927 and is headquartered in Calgary, Canada. Canadian Utilities Limited is a subsidiary of ATCO Ltd.
How the Company Makes MoneyCanadian Utilities Limited generates revenue through several key streams. Primarily, it earns from regulated utility operations in electricity and natural gas, where it provides essential services such as electricity distribution and natural gas transmission to residential, commercial, and industrial customers. The company also derives income from unregulated businesses, including energy retailing and infrastructure development projects. Additionally, Canadian Utilities benefits from strategic partnerships and joint ventures that expand its reach and operational capacity in both domestic and international markets. Regulated operations often provide stable and predictable cash flows due to long-term contracts and government regulations, while unregulated operations offer growth opportunities through market-driven activities.
Canadian Utilities A Financial Statement Overview
Summary
Canadian Utilities A shows strong operational efficiency and stable asset management typical of regulated utilities. However, challenges include fluctuating revenue, declining net profit margins, and high leverage levels. Consistent positive operating cash flow is a positive indicator, but volatility in free cash flow suggests cash management concerns.Income Statement
Canadian Utilities A has seen fluctuating revenue growth with a recent decline, indicating potential challenges in expanding its revenue base. Despite this, the company maintains a strong gross profit margin, reflecting effective cost management. The EBIT and EBITDA margins are robust, suggesting operational efficiency, although there is a noticeable decline in net profit margin over the years.67
Positive
Balance Sheet
The company has a relatively high debt-to-equity ratio, which poses a risk of financial leverage, but is common in the utilities sector. The equity ratio remains stable, indicating a strong asset base supported by equity. Return on equity has decreased, pointing to challenges in generating profits from shareholders' equity.72
Positive
Cash Flow
Operating cash flow remains strong and consistently positive, but free cash flow has been volatile, which may impact future investments. The operating cash flow to net income ratio suggests that cash flow generation is healthy relative to net income, though recent free cash flow growth has been negative, highlighting potential cash management concerns.64
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 3.74B | 3.80B | 4.05B | 3.52B | 3.23B | Gross Profit |
| 2.60B | 2.57B | 2.73B | 2.37B | 2.27B | EBIT |
| 1.06B | 1.32B | 1.21B | 940.00M | 972.00M | EBITDA |
| 1.84B | 2.09B | 1.80B | 1.53B | 1.55B | Net Income Common Stockholders |
| 480.00M | 707.00M | 632.00M | 393.00M | 427.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 332.00M | 407.00M | 698.00M | 746.00M | 776.00M | Total Assets |
| 23.79B | 23.16B | 21.97B | 21.07B | 20.30B | Total Debt |
| 11.11B | 10.59B | 9.59B | 9.57B | 9.11B | Net Debt |
| 10.94B | 10.38B | 8.89B | 8.82B | 8.34B | Total Liabilities |
| 16.67B | 16.00B | 14.91B | 14.25B | 13.49B | Stockholders Equity |
| 6.91B | 6.94B | 6.88B | 6.63B | 6.62B |
| Cash Flow | Free Cash Flow | |||
| 322.00M | -12.00M | 771.00M | 497.00M | 741.00M | Operating Cash Flow |
| 1.92B | 1.33B | 2.14B | 1.72B | 1.63B | Investing Cash Flow |
| -1.41B | -2.25B | -1.26B | -1.26B | -905.00M | Financing Cash Flow |
| -790.00M | 434.00M | -932.00M | -478.00M | -924.00M |
Canadian Utilities A Technical Analysis
Positive
37.60
Price Trends
36.18
Positive
35.09
Positive
34.39
Positive
Market Momentum
0.55
Negative
56.00
Neutral
48.23
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:CU, the sentiment is Positive. The current price of 37.6 is above the 20-day moving average (MA) of 37.03, above the 50-day MA of 36.18, and above the 200-day MA of 34.39, indicating a bullish trend. The MACD of 0.55 indicates Negative momentum. The RSI at 56.00 is Neutral, neither overbought nor oversold. The STOCH value of 48.23 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:CU.
Canadian Utilities A Peers Comparison
Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Performance Comparison
TSE:CU
Canadian Utilities A
37.60
8.57
29.52%
ENB
Enbridge
46.86
12.80
37.58%
BEP
Brookfield Renewable Partners
22.83
-1.51
-6.20%
AQN
Algonquin Power & Utilities
5.39
-0.79
-12.78%
FTS
Fortis
48.56
10.22
26.66%
EMRAF
Emera
44.36
11.45
34.79%
Canadian Utilities A Earnings Call Summary
Earnings Call Date:Feb 27, 2025
(Q4-2024)
| % Change Since: 7.77%|
Next Earnings Date:May 07, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted significant achievements in adjusted earnings growth, expansion plans, and positive developments in Australia. However, challenges such as decreased ROE, renewable market uncertainties, and regulatory issues present notable headwinds. Despite these challenges, the company's strategic investments and focus on growth provide a positive outlook.Q4-2024 Updates
Positive Updates
Strong Adjusted Earnings Growth
Canadian Utilities achieved adjusted earnings of $647 million in 2024, up from $596 million in 2023, translating to adjusted earnings per share of $2.38.
ATCO Energy Systems Performance
ATCO Energy Systems delivered adjusted earnings of $632 million in 2024, an increase of 11% or $61 million compared to 2023. This was driven by rate base growth and an increase in the allowable ROE.
Expansion Plans and Capital Investment
The company invested $1.4 billion in utilities within ATCO Energy Systems and plans to invest $5.8 billion within Canadian regulated utilities over the next three years. This is expected to drive an average annual rate base growth of 5.4%.
Positive Developments in Australia
In Australia, ATCO Gas delivered adjusted earnings of $48 million. The new AA6 plan increased the regulated ROE to 8.23%, expected to increase adjusted earnings by 8% to 10% in 2025.
Negative Updates
Decrease in Allowable ROE
The allowable ROE for ATCO Energy Systems in Alberta was reset from 9.28% to 8.97% for 2025, expected to negatively impact earnings by approximately $15 million.
Renewable Energy Market Uncertainties
A significant decrease in merchant power prices in Alberta led to a lower average realized price of $75 per megawatt in 2024 compared to $95 in 2023. Additionally, regulatory uncertainty is causing delays in renewable projects in Alberta.
Challenges in Australian Operations
Adjusted earnings in ATCO Australia fell by $12 million compared to 2023 due to the impact of lower inflation indexing on the rate base.
Regulatory and Political Uncertainty
The company faces uncertainty due to political and regulatory conditions affecting hydrogen and carbon projects, both federally and provincially.
Company Guidance
During the Canadian Utilities Limited fourth quarter 2024 results conference call, the company provided guidance on several key financial metrics and future expectations. In 2024, Canadian Utilities achieved adjusted earnings of $647 million, up from $596 million in 2023, translating to adjusted earnings per share of $2.38. ATCO Energy Systems reported adjusted earnings of $632 million, an 11% increase from the previous year, driven by rate base growth and an increase in the allowable return on equity (ROE) from 8.5% in 2023 to 9.8% in 2024. However, for 2025, the allowable ROE is set to decrease to 8.97%, impacting earnings by approximately $15 million. Despite these headwinds, the company anticipates continued rate base growth and efficiency improvements. The ATCO EnPower segment achieved an adjusted EBITDA of $146 million, up $14 million, with adjusted earnings of $44 million. Within its electricity generation business, adjusted EBITDA increased by $2 million to $75 million, despite lower power prices. The storage and industrial water business also performed well, with an adjusted EBITDA of $71 million, up $7 million. ATCO Australia, however, saw adjusted earnings decline by $12 million due to lower inflation indexing. Overall, Canadian Utilities generated $1.9 billion in cash flow from operations, supporting their capital program and commitments. Looking forward, Canadian Utilities plans to invest $5.8 billion in its Canadian regulated utilities over the next three years, targeting an average annual rate base growth of 5.4%.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
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.