Canadian Utilities A (CU) AI Stock Analysis

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Canadian Utilities A

(TSX:CU)

Rating:72Outperform

Price Target:

C$41.00

▲(7.61%Upside)

Canadian Utilities A is well-positioned within the Diversified Utilities industry, showcasing strong financial performance with robust profitability metrics and stable cash flow generation. The technical indicators suggest a positive trend, though momentum is limited. The valuation appears slightly high, which could be a concern for value-focused investors, but the attractive dividend yield provides some compensation. Regulatory uncertainties and project delays in Alberta represent key risks that could impact future growth. Overall, the stock is solid but faces challenges that need addressing to enhance its market appeal.

Positive Factors

Earnings Performance

The Q1 results were in line with expectations, with an adjusted EPS slightly above consensus, driven by greater performance in ATCO Energy Systems.

Financial Strategy

The equity funding needs for future projects could be managed through Indigenous partnerships, debt, and hybrids, reducing the reliance on common equity.

Project Viability

Canadian Utilities assured the market that the $2.8B Yellowhead project remains viable despite the announced delay in Dow's Path2Zero project.

Negative Factors

Market Reaction

Comments on the call that Alberta utility earnings will moderate overshadowed the 3% EPS beat and positive revision to rate base growth.

Regulatory Concerns

Investors seem to be cautious, focusing on the regulatory approval for the Yellowhead project and clarity on hydrogen project policies.

Stock Performance

Canadian Utilities shares underperformed compared to large-cap Canadian utility peers, remaining flat while others gained.

Canadian Utilities A (CU) vs. iShares MSCI Canada ETF (EWC)

Market Cap

C$7.80B

Dividend Yield4.81%

Average Volume (3M)517.05K

Price to Earnings (P/E)26.1

Beta (1Y)0.50

Revenue Growth-0.53%

EPS Growth-31.77%

CountryCA

Employees9,084

SectorUtilities

Sector Strength84

IndustryDiversified Utilities

Share Statistics

EPS (TTM)0.77

Shares Outstanding205,208,040

10 Day Avg. Volume446,933

30 Day Avg. Volume517,054

Financial Highlights & Ratios

PEG Ratio-15.74

Price to Book (P/B)1.44

Price to Sales (P/S)0.00

P/FCF Ratio30.68

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

C$40.50

Price Target Upside6.30% Upside

Rating ConsensusHold

Number of Analyst Covering4

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 Earnings Call Summary

Earnings Call Date:May 07, 2025

(Q1-2025)

% Change Since: 0.50%|

Next Earnings Date:Jul 24, 2025

Earnings Call Sentiment Neutral

The earnings call highlighted strong financial performance and strategic investments, particularly in Alberta and Australia. However, this was tempered by regulatory uncertainties and project delays affecting the company's operations and growth in Alberta.

Q1-2025 Updates

Positive Updates

Strong Start to Fiscal Year 2025

Canadian Utilities achieved adjusted earnings of $232 million, up from $225 million in the same period in 2024, translating to adjusted earnings per share of $0.85 for the quarter.

Increased Investment in Alberta Utilities

The company expects to invest $5.8 billion over the next three years, with $1.5 billion planned for this year alone, primarily in natural gas transmission through the Yellowhead pipeline project.

Positive Regulatory Decision in Australia

A regulated Australian gas utility began operating under the Sixth Access Arrangement with an ROE of 8.23%, up from 5.02%, providing certainty across tariffs and investments through 2029.

Strong Cash Generation

Cash from operations was $637 million in the quarter, up 27% from the prior year, supporting operations, capital programs, and financial commitments.

Growth in ATCO EnPower

ATCO EnPower delivered adjusted EBITDA of $37 million, up $6 million, and adjusted earnings of $11 million, up $3 million compared to Q1 2024.

Negative Updates

Regulatory Uncertainty in Alberta

Due to regulatory uncertainty around Alberta's restructured energy market and transmission regulations, future development opportunities within generation have been paused.

Challenges in Electricity Generation Business

The electricity generation business was impacted by lower capture pricing at the Forty Mile Wind facility due to ongoing uncertainty in the Alberta power market.

Impact of Dow Project Delay

Dow's delay in construction at their Path2Zero project in Fort Saskatchewan raised concerns, although it's claimed not to impact the Yellowhead project.

Lower ROE in Alberta for 2025

The allowable ROE for Alberta Utilities was reset to 8.97% for 2025, down from 9.28% in 2024, impacting expected earnings.

Company Guidance

During the first quarter 2025 results conference call for Canadian Utilities Limited, several key metrics and future plans were discussed. The company announced a $5.8 billion capital investment program over the next three years, primarily targeting their regulated utilities in Canada, with $1.5 billion of that to be invested in 2025 alone. The Yellowhead pipeline project, which aims to deliver 1.1 billion cubic feet per day of natural gas, is a major focus, with a preliminary preferred route selected and expected to be in service by Q4 2027. Canadian Utilities reported adjusted earnings of $232 million for Q1, up from $225 million in the same period in 2024, translating to adjusted earnings per share of $0.85. ATCO Energy Systems contributed $232 million in adjusted earnings, marking a 5% increase from Q1 2024. Additionally, ATCO EnPower reported an adjusted EBITDA of $37 million, up $6 million from the prior year. The company also highlighted the positive regulatory decision for its Australian gas utility, which set a new Return on Equity (ROE) of 8.23% for the AA6 period. Canadian Utilities remains focused on leveraging its natural gas and liquid storage assets, expecting significant growth and continued strong cash generation to support its capital program.

Canadian Utilities A Financial Statement Overview

Summary

Canadian Utilities A shows strong profitability and stable financial health, with a high gross profit margin and moderate leverage. However, slight declines in revenue and free cash flow growth suggest potential areas for improvement. The company remains well-positioned within the Diversified Utilities industry but should focus on sustaining revenue growth and enhancing cash flow efficiency.

Income Statement

Positive

The company shows a stable gross profit margin of around 70% in TTM, with a slight decrease in net profit margin to 12.7% from 12.8% in the previous annual report. Revenue growth is negative at -0.16% TTM, indicating a slight decline. The EBIT margin remains strong at 28.2% TTM. However, the EBITDA margin decreased slightly to 48.7% TTM from 47.1%. Overall, the income statement reflects strong profitability, though recent revenue trends suggest potential challenges.

Balance Sheet

Positive

The balance sheet is moderately leveraged with a debt-to-equity ratio of 1.62 in TTM, reflecting a stable financial position. The equity ratio is 29.0%, indicating a firm reliance on equity financing. ROE stands at 6.8% TTM, slightly down from the previous year, suggesting stable but unspectacular returns on equity. The company maintains a solid equity base but should monitor its debt levels.

Cash Flow

Positive

The cash flow statement reveals a robust operating cash flow to net income ratio of 4.06 in TTM, indicating strong cash generation relative to net income. The free cash flow to net income ratio is 0.52, suggesting moderate conversion of earnings to free cash flow. Free cash flow growth rate is negative at -23.3% in TTM, reflecting challenges in maintaining free cash flow levels. Overall, the company demonstrates strong cash flow generation despite recent pressures on free cash flow.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
3.74B	3.74B	3.80B	4.05B	3.52B	3.23B
	Gross Profit
2.63B	2.60B	2.57B	2.73B	2.37B	2.27B
	EBIT
1.05B	1.06B	1.32B	1.21B	940.00M	972.00M
	EBITDA
1.82B	1.76B	2.09B	1.80B	1.53B	1.55B
	Net Income Common Stockholders
474.00M	480.00M	707.00M	632.00M	393.00M	427.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
407.00M	332.00M	356.00M	698.00M	746.00M	776.00M
	Total Assets
23.16B	23.79B	23.16B	21.97B	21.07B	20.30B
	Total Debt
10.59B	11.11B	10.59B	9.59B	9.57B	9.11B
	Net Debt
10.38B	10.94B	10.38B	8.89B	8.82B	8.34B
	Total Liabilities
16.00B	16.67B	16.00B	14.91B	14.25B	13.49B
	Stockholders Equity
6.94B	6.91B	6.94B	6.88B	6.63B	6.62B
Cash Flow		Free Cash Flow
248.00M	322.00M	-12.00M	771.00M	497.00M	741.00M
	Operating Cash Flow
1.93B	1.92B	1.33B	2.14B	1.72B	1.63B
	Investing Cash Flow
-1.46B	-1.41B	-2.25B	-1.26B	-1.26B	-905.00M
	Financing Cash Flow
-553.00M	-790.00M	434.00M	-932.00M	-478.00M	-924.00M

Canadian Utilities A Technical Analysis

Technical Analysis Sentiment

Positive

Last Price38.10

Price Trends

50DMA

37.47

Positive

100DMA

36.10

Positive

200DMA

35.34

Positive

Market Momentum

MACD

0.13

Positive

RSI

55.76

Neutral

STOCH

43.15

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 38.1 is above the 20-day moving average (MA) of 37.97, above the 50-day MA of 37.47, and above the 200-day MA of 35.34, indicating a bullish trend. The MACD of 0.13 indicates Positive momentum. The RSI at 55.76 is Neutral, neither overbought nor oversold. The STOCH value of 43.15 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 (64)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ACO.X	81 Outperform	C$5.70B	13.30	9.25%	3.92%	6.84%	4.03%
CU	72 Outperform	C$7.80B	26.06	6.76%	4.81%	-0.53%	-31.77%
H	67 Neutral	C$29.12B	23.88	10.15%	2.71%	9.95%	11.34%
Sector *	64 Neutral	$8.62B	10.39	4.24%	4.63%	4.07%	-13.04%
FTS		$23.83B	19.99	7.46%	3.75%	―	―
EMA		$13.24B	21.34	7.12%	4.66%	―	―
ACLTF		$4.18B	14.62	9.23%	2.71%	―	―

* Utilities Sector Average

Performance Comparison

TSE:CU

Canadian Utilities A

38.10

9.32

32.38%

TSE:ACO.X

ATCO Ltd Cl I NV

51.99

14.92

40.25%

TSE:H

Hydro One

49.24

11.16

29.31%

FTS

Fortis

48.16

10.86

29.12%

EMA

Emera

45.13

13.33

41.92%

ACLTF

ATCO

40.03

10.65

36.25%

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.