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Canadian Utilities A (TSE:CU)
TSX:CU
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Canadian Utilities A
(TSX:CU)
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Rating:58Neutral
Price Target:
C$49.00
▲(3.27% Upside)
Action:DowngradedDate:03/01/26
The score is held back primarily by weakened recent financial performance (lower revenue/earnings, higher leverage, and volatile free cash flow) and a very expensive P/E valuation. These are partly offset by strong technical momentum and a generally constructive earnings call focused on capital plan-driven regulated growth and improved operating cash flow, albeit with renewables and execution/funding risks.
Positive Factors
Regulated capital-driven growth
A large, regulated capital program that lifts rate base at a 6.9% CAGR provides durable earnings and cash-flow growth via cost-of-service returns. Over 2–6 months this supports predictable revenue expansion and regulatory recovery of invested capital, underpinning long-term utility economics.
Strong operating cash generation
Consistently strong operating cash flow funds reinvestment and debt servicing without immediate reliance on equity. This durable cash generation underpins capital program funding flexibility, supports dividend capacity, and reduces vulnerability to short-term earnings volatility over coming quarters.
Project contracting and financing execution
Demonstrated ability to fully contract large projects and fund equity portions via hybrids/preferreds reduces dilution risk and shows access to non‑dilutive capital. This durable execution capability lowers financing execution risk for near‑term projects and supports rate-base growth delivery.
Negative Factors
High and rising leverage
A materially higher debt-to-equity ratio increases financial rigidity and interest burden for a capital-intensive utility. Over the medium term this constrains financial flexibility for further projects, raises refinancing risk if rates rise, and could pressure credit metrics and funding costs.
Weak and volatile free cash flow
Volatile and reduced free cash flow after heavy investment limits ability to self-fund growth, sustain distributions, or absorb shocks. With large ongoing capex, persistently low FCF increases reliance on external financing and heightens execution and liquidity risk across the capital plan horizon.
Renewables and major-project execution risk
Operational curtailment, impairments and paused clean-fuel projects signal revenue exposure and execution risk in growth areas. Combined with large project cost/timing uncertainty, these durable structural issues can depress returns on new investments and force asset recycling or equity raises.
Canadian Utilities A (CU) vs. iShares MSCI Canada ETF (EWC)
Market Cap
C$12.90B
Dividend Yield4.33%
Average Volume (3M)422.49K
Price to Earnings (P/E)307.9
Beta (1Y)0.26
Revenue Growth-0.94%
EPS Growth25.64%
CountryCA
Employees9,084
SectorUtilities
Sector Strength65
IndustryDiversified Utilities
Share Statistics
EPS (TTM)0.72
Shares Outstanding205,317,640
10 Day Avg. Volume547,242
30 Day Avg. Volume422,489
Financial Highlights & Ratios
PEG Ratio-1.09
Price to Book (P/B)1.82
Price to Sales (P/S)3.15
P/FCF Ratio112.76
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$47.33Price Target Upside-0.25% Downside
Rating ConsensusHold
Number of Analyst Covering6
EPS Forecast (FY)2.52
Revenue Forecast (FY)C$4.20B
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 A generates revenue through multiple key streams. The primary source of income comes from the regulated utility operations segment, which includes the distribution and transmission of electricity and natural gas. These utility services often operate under a cost-of-service model, allowing CU to earn a regulated return on its capital investments. Additionally, the company profits from its electricity generation assets, which produce power sold either to the grid or directly to large customers. The energy infrastructure segment further contributes through long-term contracts and partnerships with various industrial clients, enhancing revenue stability. CU also benefits from investments in renewable energy projects and infrastructure, which are increasingly becoming significant in the context of the global shift towards sustainable energy solutions. Strategic partnerships with local governments and private sectors facilitate access to new markets and projects, thereby supporting revenue growth.
Canadian Utilities A Earnings Call Summary
Earnings Call Date:Feb 26, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 23, 2026
Earnings Call Sentiment Positive
The call presented a largely positive picture: management delivered adjusted earnings growth and materially improved cash flow while announcing an ambitious $12 billion 5-year capital plan and demonstrating financing capability for the Yellowhead pipeline. Strong operational results, Australian outperformance (AA6), large new gas connections and storage expansion are notable wins. Key challenges remain in the renewables portfolio (significant curtailment and related impairments), a paused hydrogen hub due to policy gaps, timing and cost uncertainty on large projects, and potential future need for equity or asset recycling to fund the outer years of the plan. Overall, the positive operational and financial momentum and executable funding for major near-term projects outweigh the highlighted risks.Q4-2025 Updates
Positive Updates
Adjusted Earnings Growth
Full-year 2025 adjusted earnings of $658 million ($2.42/share), up from $647 million in 2024 — an increase of $11 million or ~1.7% year-over-year, achieved despite $57 million of identified headwinds.
Large 5-Year Capital Plan and Higher Rate Base CAGR
Announced a $12 billion capital expenditure plan over 5 years — the most ambitious in company history — driving a regulated rate base 5-year CAGR of 6.9% (up from the prior 3-year forecast of 5.4%, a +1.5 percentage point increase / ~27.8% relative jump).
Yellowhead Pipeline Progress and Contracting
Yellowhead pipeline is 100% contracted, facility application filed with AUC, $2.9 billion project estimate (plus/minus 20%), expected facility approval by Q3 enabling construction; equity portion for the project fully funded via hybrids, preferred shares and cash from operations without issuing common equity.
Strong Operational Achievements and Safety
Maintained strong operational performance and improved Alberta distribution reliability despite an above-average wildfire season; achieved 0 recordable incidents across nonregulated businesses in 2025.
Australian Business Outperformance (AA6)
ATCO Australia delivered adjusted earnings of $69 million, up $21 million year-over-year (~45% increase), benefiting from the new AA6 access arrangement (ROE 8.23%) and projected customer growth (expected ~80,000 new customers during AA6).
Growth in Gas Connections and Local Demand
ATCO Energy Systems added over 19,600 new gas connections in 2025 — the largest number in a decade — supported by Alberta's strong population and industrial growth driving higher electricity load forecasts.
Storage & Industrial Water Segment Strength
Storage and Industrial Water segment grew adjusted earnings by $11 million, a 30% year-over-year increase; company intends to expand carbon and gas storage capacity from 117 PJ to 130 PJ by end of 2026 (an ~11.1% capacity increase).
Key Project Milestones (CETO and Acquisitions)
Central East Transfer-Out (CETO) ($255 million) on track (85 km transmission line to be energized by June); acquired 100% of Northstone Power (18.6 MW gas peaker) to bolster generation portfolio and peaking capability.
Improved Cash Flow and Capital Funding Execution
Cash flow from operating activities increased by $144 million in 2025; successful funding of Yellowhead equity via hybrids, preferred shares and cash demonstrates financing capability and avoided common equity issuance.
Negative Updates
Renewables Curtailment and Impairments
Significant curtailment on wind assets (up to ~40% on the largest 40-mile project versus near 0% a year prior) and related earnings pressure; renewables portfolio faced a $12 million earnings deficit tied to changing congestion policy and uncertainty in financial transmission rates.
Challenged Renewable Market and Earnings Uncertainty
Company referenced renewables market challenges and impairments; EnPower generated about $60 million of EBITDA in 2025 with potential downside under stress scenarios tied to curtailment and congestion — management did not quantify full downside in call.
Pause on Alberta Hydrogen Hub
Work on the Alberta Hydrogen Hub paused due to lack of Government of Canada support for rail infrastructure expansion and inadequate policy frameworks, delaying a cleaner-fuels growth opportunity.
Timing and Execution Risk on Large Projects
Facility approval timing (e.g., Yellowhead expected by Q3) and potential slips could delay construction and increase costs; Yellowhead estimate filed at $2.9 billion ±20%, indicating material cost uncertainty during final design and scheduling.
Possible Need for External Funding for Outer Years
While Yellowhead equity is currently funded, management indicated that for the full $12 billion plan (outer years) there will 'probably' be a need for capital recycling or an equity component — creating future funding uncertainty.
Large Future Investment Opportunities With Uncertain Timing
Major system reinforcements such as the McNeill converter replacement (~$1 billion, majority costs likely outside the 5-year plan) and other potential intertie/substation projects present sizable future spending that could pressure near-term returns or funding plans.
Regulatory and ROE Headwinds in 2025
A change in Alberta return-on-equity and the completion of the efficiency carryover mechanism created an immediate $26 million earnings gap in 2025 that management needed to overcome.
Company Guidance
The call provided detailed operational and financial guidance with many concrete metrics: Canadian Utilities delivered 2025 adjusted earnings of $658 million ($2.42/share) versus $647 million in 2024, overcoming $57 million of headwinds (including a $26 million ROE/efficiency gap and a $12 million renewables shortfall), supported by $36 million of Alberta utility rate base growth, $21 million from Australia (ATCO Australia adjusted earnings $69 million, up ~$21 million or ~45%), and $11 million (30% YoY) from Storage & Industrial Water; ATCO Energy Systems earned $642 million (up $10 million), cash flow from operations rose by $144 million, and the company added ~19,600 new gas connections in 2025. Management announced a $12 billion five‑year capital plan with a 5‑year regulated CAGR of 6.9% (up from a prior 3‑year forecast of 5.4%), Yellowhead pipeline filings for a ~$2.9 billion (+/‑20%) facility (fully contracted and equity‑funded via hybrids, preferreds and cash, with up to 30% indigenous partner interest and expected facility approval by Q3 to enable late‑Q3 construction), CETO ($255 million, 85 km to be energized by June), preliminary opportunities including a $500 million Northwest transmission estimate and a ~$1 billion McNeill converter scope (mostly outside the 5‑year plan), AA6 Australia ROE of 8.23% with ~80,000 expected new customers over the period and $500 million of Australian gas investment, expansion of storage from 117 PJ to 130 PJ by end‑2026, acquisition of an 18.6 MW peaker (Northstone), Atlas CCS commercial ops targeted late 2028, 0 recordable incidents in nonregulated businesses in 2025, and an expectation of further adjusted earnings growth in 2026.Canadian Utilities A Financial Statement Overview
Summary
Recent fundamentals are pressured: 2025 revenue fell sharply (~27%) and net income dropped materially with margin compression. Operating cash flow remains solid (1.54B), but free cash flow weakened and is volatile, while leverage rose (debt-to-equity ~1.95) and ROE fell (~1.9%).Income Statement
Revenue has been choppy and is down recently (2025 revenue declined ~27% after modest declines in 2023–2024). Profitability also weakened materially in 2025: net income fell to 119M from 480M in 2024 and 707M in 2023, with net margin compressing to ~3.2% (vs. ~12.8% in 2024). Positively, the business has historically generated solid operating profitability (EBITDA margin ~47–53% in most years), but the latest-year step-down in margins and earnings reduces confidence in near-term earnings quality.44
Neutral
Balance Sheet
The balance sheet is meaningfully levered, with debt-to-equity rising to ~1.95 in 2025 (up from ~1.61 in 2024 and ~1.39–1.52 in 2022–2023), consistent with a capital-intensive utility profile but still a clear risk factor. Asset base has grown steadily (total assets ~24.5B in 2025 vs. ~21.0B in 2021), yet returns to shareholders weakened sharply as profitability fell, with return on equity dropping to ~1.9% in 2025 from ~6.9% in 2024 and ~10.2% in 2023. Overall: stable asset backing, but higher leverage and reduced returns pressure the score.47
Neutral
Cash Flow
Operating cash generation remains solid (operating cash flow 1.54B in 2025), supporting the business even as earnings fell. However, free cash flow has been volatile and weakened notably in 2025 to 103M (down from 322M in 2024 and 771M in 2022), and free cash flow relative to net income is low in 2025 (~6.7%), indicating limited residual cash after investment needs. The company’s ability to keep producing healthy operating cash flow is a strength, but inconsistent free cash flow is a key constraint.52
Neutral
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 3.69B | 3.74B | 3.80B | 4.05B | 3.52B |
| Gross Profit | 914.00M | 1.44B | 1.45B | 1.72B | 1.36B |
| EBITDA | 1.86B | 1.76B | 2.03B | 1.80B | 1.53B |
| Net Income | 119.00M | 480.00M | 707.00M | 632.00M | 393.00M |
Balance Sheet | |||||
| Total Assets | 24.54B | 23.79B | 23.16B | 21.97B | 21.07B |
| Cash, Cash Equivalents and Short-Term Investments | 921.00M | 332.00M | 356.00M | 698.00M | 746.00M |
| Total Debt | 12.44B | 11.11B | 10.59B | 9.59B | 9.57B |
| Total Liabilities | 17.94B | 16.67B | 16.00B | 14.91B | 14.25B |
| Stockholders Equity | 6.38B | 6.91B | 6.94B | 6.88B | 6.63B |
Cash Flow | |||||
| Free Cash Flow | 103.00M | 322.00M | -12.00M | 771.00M | 497.00M |
| Operating Cash Flow | 1.54B | 1.92B | 1.33B | 2.14B | 1.72B |
| Investing Cash Flow | -1.64B | -1.41B | -2.25B | -1.26B | -1.26B |
| Financing Cash Flow | 846.00M | -790.00M | 434.00M | -932.00M | -478.00M |
Canadian Utilities A Technical Analysis
Positive
47.45
Price Trends
43.92
Positive
42.08
Positive
39.55
Positive
Market Momentum
1.15
Negative
65.90
Neutral
59.84
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 47.45 is above the 20-day moving average (MA) of 45.78, above the 50-day MA of 43.92, and above the 200-day MA of 39.55, indicating a bullish trend. The MACD of 1.15 indicates Negative momentum. The RSI at 65.90 is Neutral, neither overbought nor oversold. The STOCH value of 59.84 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
UnderperformOutperform
Sector (66)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
66 Neutral | $17.65B | 18.10 | 5.60% | 3.62% | 6.62% | 11.55% | |
64 Neutral | C$9.92B | 22.74 | 9.40% | 4.44% | -2.99% | -32.11% | |
59 Neutral | C$8.97B | -28.28 | ― | 4.56% | 3.29% | 76.89% | |
58 Neutral | C$12.90B | 307.90 | 8.84% | 4.33% | -0.94% | 25.64% | |
55 Neutral | $5.61B | -29.52 | -9.02% | 1.46% | -11.00% | -227.07% | |
54 Neutral | C$6.60B | 48.56 | 9.32% | 3.62% | 7.75% | 11.25% | |
54 Neutral | C$7.31B | -173.86 | 2.04% | 4.32% | -4.72% | 96.98% |
* Utilities Sector Average
TSE:CU
Canadian Utilities A
47.95
14.03
41.35%
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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.