Canadian Utilities A (CU) AI Stock Analysis

• Market Cap: C$7.82B
• Dividend Yield: 4.74%
• Average Volume (3M): 565.43K
• Price to Earnings (P/E): 23.2
• Beta (1Y): 0.45
• Revenue Growth: -0.51%
• EPS Growth: -17.17%
• Country: CA
• Employees: 9,084
• Sector: Utilities
• Sector Strength: 78
• Industry: Diversified Utilities
• EPS (TTM): 0.38
• Shares Outstanding: 205,242,540
• 10 Day Avg. Volume: 541,762
• 30 Day Avg. Volume: 565,431
• PEG Ratio: -0.54
• Price to Book (P/B): 1.37
• Price to Sales (P/S): 2.53
• P/FCF Ratio: 29.37
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: C$40.75
• Price Target Upside: 5.71% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 4

• Rating: 68 Neutral
• Price Target: C$42.00 ▲(8.95% Upside)

Canadian Utilities A's overall stock score is driven by strong financial performance and positive technical indicators. The company's profitability and cash flow generation are robust, but high leverage and declining revenue growth present risks. The stock's technical outlook is favorable, with bullish trends supported by moving averages. Valuation metrics suggest potential overvaluation, balanced by a high dividend yield. The earnings call highlighted growth and strategic initiatives, though regulatory challenges remain a concern.

Positive Factors

Capital Expenditure

CU introduced ATCO Energy Systems 2025-2027 capex program of $5.8B, implying a CAGR of ~5.4% while maintaining long-term guidance of 4-5%.

Earnings

The Q4/24 earnings report highlighted that rate base growth is once again on the rise.

Financial Performance

Q4/24 adj. EPS of $0.74 came in above consensus' $0.72 and analyst's $0.70, driven by greater ATCO Energy Systems and lower Corporate expense.

Negative Factors

Earnings Outlook

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

Investor Sentiment

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

Market Performance

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

Canadian Utilities A Business Overview & Revenue Model

Company Description

Canadian 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 Money

Canadian Utilities makes money through a diverse set of revenue streams primarily tied to its regulated and unregulated energy businesses. In the electricity sector, the company generates revenue from the generation, transmission, and distribution of electricity to residential, commercial, and industrial customers in regulated markets, ensuring stable and predictable cash flows. The pipelines and liquids segment contributes to its earnings by transporting and distributing natural gas, with revenues coming from regulated tariffs and contracts. Additionally, Canadian Utilities earns income from its retail energy operations by selling electricity and natural gas directly to end customers. The company's revenue model is bolstered by long-term contracts and regulatory frameworks that provide steady income streams, while its international operations and investments in infrastructure development and industrial water solutions offer opportunities for growth and diversification.

Canadian Utilities A Financial Statement Overview

Summary

Canadian Utilities shows strong profitability and stable financial health, with high gross profit margins and moderate leverage. However, slight declines in revenue and free cash flow growth suggest potential areas for improvement.

Income Statement

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

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

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.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	3.72B	3.74B	3.80B	4.05B	3.52B	3.23B
Gross Profit	2.36B	2.60B	2.57B	2.73B	2.37B	2.27B
EBITDA	1.89B	1.76B	2.09B	1.80B	1.59B	1.55B
Net Income	523.00M	480.00M	707.00M	632.00M	393.00M	427.00M
Balance Sheet
Total Assets	23.88B	23.79B	23.16B	21.97B	21.07B	20.30B
Cash, Cash Equivalents and Short-Term Investments	401.00M	332.00M	356.00M	698.00M	746.00M	776.00M
Total Debt	11.36B	11.11B	10.59B	9.59B	9.57B	9.11B
Total Liabilities	16.69B	16.67B	16.00B	14.91B	14.25B	13.49B
Stockholders Equity	6.98B	6.91B	6.94B	6.88B	6.63B	6.62B
Cash Flow
Free Cash Flow	288.00M	322.00M	-12.00M	771.00M	497.00M	741.00M
Operating Cash Flow	2.02B	1.92B	1.33B	2.14B	1.72B	1.63B
Investing Cash Flow	-1.55B	-1.41B	-2.25B	-1.26B	-1.26B	-905.00M
Financing Cash Flow	-428.00M	-790.00M	434.00M	-932.00M	-478.00M	-924.00M

Canadian Utilities A Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 38.55
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: 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 38.55 is above the 20-day moving average (MA) of 38.31, above the 50-day MA of 37.84, and above the 200-day MA of 35.56, indicating a bullish trend. The MACD of 0.14 indicates Positive momentum. The RSI at 58.77 is Neutral, neither overbought nor oversold. The STOCH value of 74.46 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

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
H	76 Outperform	C$30.59B	24.38	10.34%	2.50%	8.03%	11.78%
ACO.X	68 Neutral	C$5.74B	12.98	9.50%	3.90%	7.64%	14.22%
CU	68 Neutral	C$7.82B	23.22	7.52%	4.74%	-0.51%	-17.17%
Sector *	67 Neutral	$17.69B	18.14	5.29%	3.53%	7.33%	12.21%
FTS	―	$25.28B	20.63	7.50%	3.44%	―	―
EMA	―	$14.24B	22.93	7.12%	2.19%	―	―
ACLTF	―	$4.13B	13.61	9.27%	3.78%	―	―