TransAlta (TAC, Financial) received an upgrade from Jefferies, moving from a Hold to a Buy rating. The price target was significantly raised from C$12 to C$20. This decision is based on the considerable influence of rising power prices in Alberta, which Jefferies believes is too significant to overlook. The firm has observed convincing signals of sustained higher electricity prices from the Alberta Electric System Operator, projected to manifest notably around 2027 and 2028 due to substantial load integration. Jefferies' discussions with local stakeholders and evaluations of AESO power price forecasts have bolstered their confidence in this outlook, leading to an upward revision of their estimates.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 5 analysts, the average target price for TransAlta Corp (TAC, Financial) is $12.16 with a high estimate of $14.63 and a low estimate of $9.88. The average target implies an upside of 16.09% from the current price of $10.47. More detailed estimate data can be found on the TransAlta Corp (TAC) Forecast page.
Based on the consensus recommendation from 7 brokerage firms, TransAlta Corp's (TAC, Financial) average brokerage recommendation is currently 2.6, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for TransAlta Corp (TAC, Financial) in one year is $6.57, suggesting a downside of 37.25% from the current price of $10.47. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the TransAlta Corp (TAC) Summary page.
TAC Key Business Developments
Release Date: May 07, 2025
- Adjusted EBITDA: $270 million, $72 million lower than Q1 2024.
- Free Cash Flow: $139 million or $0.47 per share.
- Dividend Increase: 8% increase to $0.26 per share annually.
- Share Buybacks: $24 million or $0.08 per share returned to shareholders.
- Fleet Availability: 94.9% average fleet availability.
- Hydro Segment EBITDA: $47 million, decline due to lower spot power and ancillary prices.
- Wind and Solar Segment EBITDA: $102 million, 15% increase due to new facilities and higher production.
- Gas Segment EBITDA: $104 million, 17% decrease due to lower prices and higher carbon pricing.
- Energy Transition Segment EBITDA: $37 million, increase due to lower purchase power costs.
- Energy Marketing EBITDA: $21 million, $18 million decrease due to muted market volatility.
- Corporate Costs: Increased to $41 million due to strategic and growth initiatives.
- Alberta Spot Price: Averaged $40 per megawatt hour, down from $99 in 2024.
- Hedging Strategy: 2,300 gigawatt hours hedged at $71 per megawatt hour.
- Available Liquidity: Over $1.5 billion, including $240 million cash on hand.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TransAlta Corp (TAC, Financial) delivered exceptional operational performance with an average fleet availability of 94.9% in the first quarter.
- The company announced an 8% increase in its common share dividend, marking the sixth consecutive annual dividend increase.
- TransAlta Corp (TAC) achieved a realized price premium through effective hedging strategies, outperforming spot prices in the Alberta market.
- The integration of Heartland generation was completed safely and on schedule, realizing targeted synergies.
- TransAlta Corp (TAC) secured a strategic partnership with Nova Clean Energy, providing exclusive options to purchase projects in the Western US, enhancing growth opportunities.
Negative Points
- The company's adjusted EBITDA decreased by $72 million compared to the first quarter of 2024, primarily due to milder weather in Alberta affecting power prices.
- Free cash flow was lower than the same period last year, impacted by higher sustaining capital expenditures and net interest expenses.
- TransAlta Corp (TAC) faces challenges in organic growth due to political and regulatory uncertainties, long interconnection queues, and rising costs.
- The Alberta merchant portfolio was impacted by softer-than-expected prices, despite hedging strategies.
- The company is not investment-grade credit rated, which may affect its ability to pursue certain growth opportunities.
