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Canadian Utilities A (TSE:CU)
:CU
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Canadian Utilities A
(TSX:CU)
Rating:72Outperform
Price Target:
C$41.00
â–²( 7.70% Upside)
Positive Factors
Earnings
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.
Financial Management
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
Earnings Projection
Comments on the call that Alberta utility earnings will moderate overshadowed the 3% EPS beat and positive revision to rate base growth.
Market Performance
Canadian Utilities shares underperformed compared to large-cap Canadian utility peers, remaining flat while others gained.
Regulatory Concerns
Investors seem to be cautious, focusing on the regulatory approval for the Yellowhead project and clarity on hydrogen project policies.
Canadian Utilities A (CU) vs. iShares MSCI Canada ETF (EWC)
Market Cap
C$7.80B
Dividend Yield4.77%
Average Volume (3M)628.16K
Price to Earnings (P/E)26.0
Beta (1Y)0.53
Revenue Growth-0.53%
EPS Growth-31.77%
CountryCA
Employees9,084
SectorUtilities
Sector Strength87
IndustryDiversified Utilities
Share Statistics
EPS (TTM)0.77
Shares Outstanding204,968,490
10 Day Avg. Volume591,881
30 Day Avg. Volume628,157
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$40.20Price Target Upside5.59% Upside
Rating ConsensusHold
Number of Analyst Covering5
Canadian Utilities A Business Overview & Revenue Model
Company DescriptionCanadian Utilities Limited (CU) is a diversified global energy infrastructure corporation based in Canada. It operates in sectors including electricity, pipelines & liquids, and retail energy. The company provides integrated solutions across electricity generation, transmission, and distribution, as well as natural gas transmission, distribution, and infrastructure development.
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 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
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.72
Positive
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.68
Positive
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.75
Positive
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| 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
Positive
38.07
Price Trends
36.89
Positive
35.47
Positive
34.88
Positive
Market Momentum
0.21
Negative
58.88
Neutral
82.65
Negative
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 38.07 is above the 20-day moving average (MA) of 37.57, above the 50-day MA of 36.89, and above the 200-day MA of 34.88, indicating a bullish trend. The MACD of 0.21 indicates Negative momentum. The RSI at 58.88 is Neutral, neither overbought nor oversold. The STOCH value of 82.65 is Negative, 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 |
|---|---|---|---|---|---|---|---|
81 Outperform | C$5.87B | 13.69 | 9.25% | 3.79% | 6.84% | 4.03% | |
76 Outperform | C$5.87B | 14.06 | 9.23% | 3.93% | 6.84% | 4.03% | |
72 Outperform | C$7.80B | 26.04 | 6.76% | 4.77% | -0.53% | -31.77% | |
72 Outperform | $33.28B | 20.06 | 7.46% | 3.58% | 3.64% | 5.82% | |
72 Outperform | $18.35B | 20.93 | 7.12% | 4.61% | 8.17% | 31.60% | |
68 Neutral | C$30.34B | 24.87 | 10.15% | 2.48% | 9.95% | 11.34% | |
64 Neutral | $8.54B | 10.24 | 4.67% | 4.36% | 4.12% | -13.19% |
* Utilities Sector Average
Performance Comparison
TSE:CU
Canadian Utilities A
38.06
8.26
27.72%
TSE:FTS
Fortis
66.34
14.77
28.65%
TSE:EMA
Emera
62.65
16.89
36.92%
TSE:H
Hydro One
50.58
12.29
32.10%
TSE:ACO.X
ATCO Ltd Cl I NV
52.09
13.73
35.79%
TSE:ACO.Y
ATCO
53.50
13.19
32.71%
Canadian Utilities A Earnings Call Summary
Earnings Call Date:May 07, 2025
(Q1-2025)
| % Change Since: 0.42%|
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.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.