Reasons to add TransAlta (TAC) to your portfolio now
TransAlta Corporation TAC aims to be a leading clean electricity provider by providing customer-centric energy solutions. The company benefits from its focus on sustainable energy projects. Given its growth opportunities, TAC is a solid investment option in the utility sector.
The company currently has a Zacks Rank #2 (Buy). Let’s look at the factors driving the stock.
Growth forecasts and surprise story
The Zacks Consensus Estimate for earnings per share (EPS) in 2024 has increased 4.2% to 75 cents over the past 30 days.
The consensus estimate for earnings per share (EPS) for 2025 has increased 3.7% to 56 cents over the past 30 days.
TAC delivered an average earnings surprise of 98% over the last four quarters.
Dividend & share buyback
TAC regularly pays dividends to shareholders. The current dividend yield is 2.09%, which is better than the Zacks S&P 500 Composite average of 1.27%.
TransAlta’s management had announced an expanded common share repurchase program of up to $150 million for 2024. The company has already repurchased $89 million worth of shares under this program.
Return on equity
Return on equity (ROE) indicates how efficiently a company has used its funds to generate higher earnings. TAC’s current ROE is 47.71%, which is higher than the industry average of 10.34%. This suggests that the company has used its funds more constructively than its competitors in the Energy Utilities industry.
Solvency
The ratio of interest income to interest payments was 3.5 at the end of the second quarter. This ratio is greater than one and reflects the company’s ability to easily meet future interest obligations.
Growth strategy
The company hopes to add up to 1.75 gigawatts (GW) of capacity by investing nearly $3.5 billion to develop, build or acquire new assets by the end of 2028. It is focused on customer-facing renewable energy and storage by advancing its 5 GW development pipeline, which it plans to expand to 10 GW by 2028.
Price-performance
TAC shares have gained 21.7 percent in the past month, compared with industry growth of 5.8 percent.
Image source: Zacks Investment Research
Other stocks to consider
Other highly valued stocks in the industry are Exelon Corporation EXCEL, The AES Corporation AES and NiSource Inc. NI. Each stock currently has a Zacks Rank of 2. You can see the complete list of Zacks Rank #1 (Strong Buy) stocks here.
Exelon’s long-term earnings growth rate (three to five years) is 5.66%. Over the last four quarters, the company delivered an average earnings surprise of 4.5%.
AES Corporation delivered an average earnings surprise of 19.2% over the last four quarters. The consensus estimate for 2024 earnings is for year-over-year growth of 8.5%.
NiSource delivered an average earnings surprise of 20.6% over the last four quarters. The Zacks Consensus Estimate for 2024 earnings suggests year-over-year growth of 7.5%.
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