ALA: Rising Earnings Visibility Will Support Dividend Upside Despite Execution Risks

Analysts raised their price target on AltaGas from C$46.18 to C$47.00, citing a slightly higher valuation multiple and a modestly improved margin outlook supported by recent target increases from the Street.

Analyst Commentary

Recent target revisions suggest that bullish analysts see AltaGas as executing well against its strategic plan, with improving fundamentals helping to justify a slightly richer valuation.

Bullish Takeaways

Bullish analysts argue that the higher price target reflects confidence in sustained margin expansion across key business segments, supporting an upward shift in the valuation multiple.
The decision to move targets into the high C$40s is viewed as a signal that near term earnings visibility has improved, with less risk of downside surprises to consensus estimates.
Continued Outperform style ratings are interpreted as an endorsement of management’s execution on capital allocation and disciplined growth, particularly within regulated and contracted assets.
Supportive sector fundamentals, including stable demand and a constructive rate environment, are seen as catalysts that could allow AltaGas to close the gap to peers trading at higher multiples.

Bearish Takeaways

More cautious analysts note that the target increase is incremental rather than transformational, indicating that upside from current levels may be more measured than rapid.
There is concern that further multiple expansion could be limited if macro conditions worsen or if regulatory or commodity headwinds re emerge, pressuring earnings quality.
Some see the rising targets as embedding optimistic assumptions on future project execution and cost control, which could prove challenging if timelines slip or capital costs rise.
Valuation sensitivity to interest rates remains a watch point, with the risk that a higher rate backdrop could compress utility style multiples and cap total return potential.

What's in the News

The Board approves a 6% increase to AltaGas' annual common share dividend to $1.34 per share for 2026, with quarterly payments of $0.334 per share expected to begin in March 2026, subject to Board approval (company announcement).
AltaGas activates a contingency plan and alternate workforce at the Ridley Island Propane Export Terminal to mitigate impacts from a labor strike by ILWU Local 523B starting November 27, 2025, while reiterating 2025 full year financial guidance (company announcement).
AltaGas completes a follow on equity offering of 10.1 million common shares at CAD 39.65 per share, raising approximately CAD 400.5 million under Regulation S and Rule 144A (company transaction filing).
AltaGas files a follow on equity offering prospectus for approximately CAD 400.5 million of common shares ahead of the completed issuance, detailing pricing and structure (company transaction filing).
AltaGas is added to the FTSE All World Index in US dollars, which enhances its visibility with global index and passive investors (index provider update).

Valuation Changes

Fair Value: Risen slightly from CA$46.18 to CA$47.00, reflecting a modest uplift in the intrinsic valuation estimate.
Discount Rate: Increased marginally from 6.28% to 6.31%, implying a slightly higher required return embedded in the model.
Revenue Growth: Effectively unchanged at about 8.07%, indicating stable top line growth assumptions.
Net Profit Margin: Improved slightly from 5.15% to 5.16%, signaling a modestly stronger earnings outlook.
Future P/E: Risen slightly from 20.45x to 20.81x, suggesting a modest expansion in the forward valuation multiple applied to earnings.

Major investments in modernization and export infrastructure are set to drive stable, diversified revenue growth in response to rising energy and electrification demand.
Operational efficiencies, capital recycling, and stronger balance sheet flexibility support margin expansion and increased free cash flow for reinvestment.
Policy-driven decarbonization, high infrastructure costs, market reliance, debt exposure, and sector electrification threaten AltaGas's margins, revenue stability, and long-term growth prospects.

Catalysts

About AltaGas

Operates as an energy infrastructure company in North America.What are the underlying business or industry changes driving this perspective?

Significant investments in utility modernization and infrastructure expansion (e.g., $2 billion since 2018, ongoing ARP and rate base growth, new customer connections, and projects like the Keweenaw Connector) position AltaGas to benefit from population growth, urbanization, and rising electrification demand; this should drive stable, inflation-protected revenue and long-term earnings growth.
AltaGas's growing LPG export platform (RIPET, Ferndale, and REEF construction with proven commercial support and phased optimization/expansion plans) aligns with increasing Asian demand for low-carbon transitional fuels, creating diversified, higher-margin revenue streams and margin expansion opportunities.
Robust demand for natural gas infrastructure from new segments (e.g., data centers, industrials, and coal-to-gas power switches) in core U.S. utility jurisdictions is expected to accelerate natural gas volume growth, supporting regulated rate base and earnings expansion.
Ongoing capital recycling (e.g., planned monetization of Mountain Valley Pipeline) and deleveraging enhance balance sheet flexibility, lowering interest expense and enabling reinvestment in higher-return utility and export projects, supporting free cash flow growth.
Systematic cost optimization, asset modernization, and increased operational efficiency (including opportunities from digitalization) are expected to control operating expenses and improve net margins across both the Utilities and Midstream segments.

AltaGas Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming AltaGas's revenue will grow by 4.8% annually over the next 3 years.
Analysts assume that profit margins will shrink from 6.1% today to 5.1% in 3 years time.
Analysts expect earnings to reach CA$756.5 million (and earnings per share of CA$2.72) by about September 2028, down from CA$779.0 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.0x on those 2028 earnings, up from 15.8x today. This future PE is greater than the current PE for the CA Gas Utilities industry at 15.8x.
Analysts expect the number of shares outstanding to grow by 0.47% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 6.06%, as per the Simply Wall St company report.

AltaGas Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Ongoing policy risks from decarbonization efforts and climate initiatives (such as Maryland's Next Generation Energy Act and potential gas bans) could restrict the future growth or shrink the customer base of AltaGas's gas utilities, risking long-term revenue growth and potential asset impairments if gas infrastructure becomes stranded.
Heavy capital investment required for infrastructure modernization (over $2B since 2018 with 30% of the system still classified as "vulnerable pipes") exposes AltaGas to increasing capex and maintenance costs, pressuring net margins and raising the risk of regulatory scrutiny around the pace and rate recovery of these expenditures.
AltaGas remains highly reliant on its Western Canada gas supply and Asian LPG export markets, making its midstream revenues vulnerable to potential commodity price volatility, changing regulatory requirements, and trade tensions with key export markets-factors that can cause revenue volatility or compress margins.
While the company's deleveraging is progressing, continued high levels of debt and recurring refinancing needs expose AltaGas to rising interest rates, which could increase interest expenses and depress net earnings, particularly if access to capital tightens in a higher inflation environment.
The utility sector's long-term trend toward electrification and the potential for stricter ESG-based investment mandates could gradually erode natural gas utility demand, resulting in structurally lower utility volumes, higher cost of capital, and potentially suppressed valuations impacting AltaGas's long-term earnings profile.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of CA$43.909 for AltaGas based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$48.0, and the most bearish reporting a price target of just CA$38.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CA$14.7 billion, earnings will come to CA$756.5 million, and it would be trading on a PE ratio of 21.0x, assuming you use a discount rate of 6.1%.
Given the current share price of CA$41.1, the analyst price target of CA$43.91 is 6.4% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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