TD Newcrest Downgrades TransAlta Corp. (TAC) to Hold

October 28, 2009 10:28 AM EDT

TD Newcrest downgrades TransAlta Corp. (NYSE: TAC) to Hold. Price target lowered from $25 to $22.

TD analyst says, "TransAlta’s Q3/09 normalized EPS of $0.28 was below our $0.46 estimate, recent consensus of $0.41 and Q3/08 normalized EPS of $0.31...We have made numerous changes to our financial model resulting in lower estimates. The most significant changes include: 1) higher unplanned outages at Sundance 5 and Centralia during 2009, 2) lower Energy Trading margins moving forward, 3) reduced margins at Saranac due to the expiry of a PPA, and 4) a slight delay in the in-service date of Keephills 3. Our $22.00 target price is predicated on 25% of our 2010 and 75% of our 2011 financial estimates as follows: 1) 50% relative earnings yield of 149% (vs. historical average of 114%), and 2) 50% relative dividend yield of 132% (vs. historical average of 97%). Our target price implies a 5.3% dividend yield and a 16.7x P/E ratio, compared to historical averages of 5.1% and 16.8x, respectively."

To see more analyst ratings on TAC Click Here.

TransAlta Corporation engages in the production and sale of electric energy in Canada, the United States, and Australia.

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