From Analysts upgrades downgrades segment in tthe G&MAltagas ia A STAR !!
nside the Market’s roundup of some of today’s key analyst actions
In response to “strong” share price performance in 2021, iA Capital Markets analyst Matthew Weekes lowered the firm’s rating for AltaGas Ltd. (
) to “buy” from “strong buy” upon assuming coverage, seeing its valuation “now more reflective of its relatively low-risk Utility/Midstream business model.”
Mr. Weekes said Wednesday’s Investor Day event highlighted the Calgary-based diversified energy infrastructure company’s “strategy of investing in long-life assets across both of its platforms to drive strong risk-adjusted returns and per share cash flow and earnings growth,” which AltaGas expects will lead to 5-7-per-cent annual dividend growth through 2026, matching Mr. Weekes’s expectation.
It is now projecting 2022 normalized earnings before interest, taxes, depreciation and amortization in a range of $1.50-1.55-billion, below both Mr. Weekes’s $1.57-billion forecast and the consensus of $1.58-billion. However, its normalized earnings per share of $1.80-1.95, exceeding expectations ($1.77 and $1.82, respectively), which he attributed to a lower expected effective tax rate.
“The normalized EBITDA guidance is essentially flat compared to our 2021 forecasts due to the sale of the U.S. Transportation and Storage business, which delivered a strong contribution of $115-million in the first quarter of 2021,” the analyst said. “Adjusting for the asset sale, 2022 normalized EBITDA guidance represents an 8-per-cent year-over-year increase over our 2021 forecast.”
Mr. Weekes called its $995-million capital budget for 2022 a “disciplined” plan “focused on Utilities, optimization of Midstream assets.”
“The Utilities spend includes the Accelerated Pipe Replacement (ARP) Programs, system optimizations, new customer connections, and various transmission projects,” he said. “The Midstream spend is focused on optimizing and improving environmental performance of existing assets. ALA expects its capital plan to be self-funded with potential debt reduction if the Company is able to monetize its interest in the Mountain Valley Pipeline (MVP).”
After adjusting his projections to increase contributions from its Utilities segment while lowering his Midstream estimate, Mr. Weekes cut the firm’s target for AltaGas shares to $29 from $30. The average on the Street is $30.37.
Elsewhere, CIBC’s Robert Catellier bumped up his target by $1 to $30 with an “outperformer” rating, while Scotia Capital’s Robert Hope also raised his target to $30 from $29 with a “sector outperform” rating.
“AltaGas’ first Investor Day in numerous years highlighted to us that the company is no longer a turnaround story, but is on strong financial footing and should generate strong growth,” said Mr. Hope. “Our 2022/2023 EPS estimates increase by 12 per cent/9 per cent to reflect a stronger than expected growth outlook that drives our target to $30 from $29. The rate base of its utilities is expected to grow 8-10 per cent, which would be above its peers. Also, we were previously not giving its Midstream business enough credit for the strong outlook for volumes. The 6-per-cent dividend increase announced earlier in December plus the new 5-7-per-cent dividend CAGR out to 2026 is supported by a long term stable growth outlook. We believe AltaGas’ shares are not properly reflecting the value of its utility assets.”
ALTAGAS LTD
25.93+7.21 (38.51%)
YEAR TO DATE
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