ALA: Higher Price Outlook Will Highlight Dividend Increase Amid Execution Risks

Analysts have nudged their price target on AltaGas higher, from about C$46.00 to approximately C$48.00, citing slightly improved growth expectations and valuation multiples that support a modestly richer outlook for the shares.

Analyst Commentary

Analyst commentary surrounding the updated price target highlights a constructive view on AltaGas, with the revised target reflecting both refined growth expectations and confidence in the company’s execution track record.

Bullish Takeaways

Bullish analysts indicate that the higher price target reflects improved visibility into near to medium term earnings growth, supported by stable regulated returns and expanding midstream volumes.
They view AltaGas’s current valuation as still reasonable relative to its historical multiples, suggesting room for multiple expansion as execution remains consistent.
Recent operating performance is seen as evidence that management can deliver on capital allocation plans, which underpins confidence in cash flow growth and dividend sustainability.
The modest upward revision is interpreted as a signal that underlying business fundamentals are incrementally stronger than previously modeled, particularly in core infrastructure assets.

Bearish Takeaways

Bearish analysts caution that, despite the higher target, upside may be limited if macro conditions weaken or if energy demand growth slows versus current expectations.
They point to execution risk around upcoming projects and capital programs, noting that cost overruns or delays could pressure returns and weigh on the valuation.
There is concern that the shares are increasingly sensitive to interest rate moves, which could compress valuation multiples if rates stay higher for longer.
Some remain wary that regulatory and policy developments could introduce additional uncertainty to forecast cash flows, potentially capping near term multiple expansion.

What's in the News

The board approves a 6% increase to the annual common share dividend to $1.34 per share for 2026, with the first higher quarterly dividend of $0.334 expected to be paid on March 31, 2026, to shareholders of record on March 16, 2026 (Board dividend announcement).
AltaGas activates a contingency plan and deploys an alternate workforce to maintain materially consistent operations at the Ridley Island Propane Export Terminal amid a labour strike by ILWU Local 523B starting November 27, 2025. The company reiterates its 2025 full year guidance and expects minimal financial impact (Labour related announcement).
The company files and subsequently completes a follow on equity offering of approximately CAD 400 million, issuing 10,100,000 common shares at CAD 39.65 per share under Regulation S and Rule 144A (Follow on equity offering).
AltaGas common shares (TSX:ALA) are added to the FTSE All World Index, expanding the company’s presence in global equity benchmarks (Index constituent add).
AltaGas preferred shares (TSX:ALA.PRA) are removed from the S&P/TSX Preferred Share Index, adjusting the company’s representation in Canadian preferred share benchmarks (Index constituent drop).

Valuation Changes

Fair Value has risen slightly, from approximately CA$46.00 to about CA$46.18 per share, reflecting a modestly higher intrinsic value estimate.
Discount Rate has increased marginally, from about 6.28% to roughly 6.28%, indicating a slightly higher required return embedded in the valuation model.
Revenue Growth has improved slightly, moving from an estimated 8.02% to about 8.07%, supporting a modestly stronger top line outlook.
Net Profit Margin has edged down slightly, from roughly 5.17% to about 5.15%, implying a small reduction in expected profitability.
Future P/E has risen slightly, from about 20.31x to roughly 20.45x, pointing to a modestly richer valuation multiple on forward 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.

How well do narratives help inform your perspective?

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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