Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
CIBC analyst Robert Catellier discussed the outlook for utilities and energy infrastructure,
“Results and momentum are much stronger in Alberta power names (TA and CPX) and most regulated utilities, but with more limited upside given year-to-date performance and current valuations (investors will likely stick with these winners). Renewables remain more compelling on valuation, but the narrative remains challenged and turnaround in sentiment may still be muted in the months ahead. For midstreamers, tailwinds in natural gas offer diverse growth opportunities … We believe the change in administration in the U.S. is more likely to drive a period of digestion than outright disruption and many firms will continue to drive long-term growth (BEP, BLX and CWEN are preferred names) … Aside from AQN, outlooks range from stable to improving for regulated utility stocks with solid Q3 results and load/investment growth upside. In particular, we believe ACO.X (and CU to a lesser degree) has more value upside, and continues to see positive EPS revisions along with expanding rate base growth. Within the larger-cap utilities, EMA has the most opportunity to drive a re-rate, in our view, as it solves its balance sheet issues, removes negative credit rating outlooks and delivers better earnings (Q3 results were encouraging). H and FTS remain steady and are good options for defensive-minded investors”
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TD economist Maria Solovieva believes disaster for mortgage holders has been averted (for now),
“Our analysis suggests that mortgage renewals are going to be less stressful for households than previously feared, with aggregate payments on Canadian mortgages poised to decline for balances outstanding as of mid-2024. The key factors behind this expected easing are lower interest rates and increased payments, which have helped to front-load the payment shock. In turn, reduced debt payments could stimulate consumer spending more than expected, shifting the balance of risks toward higher inflation. This could challenge the Bank of Canada’s goal of ‘sticking the landing’ and argues for a more measured and gradual approach to rate cuts”
“Mortgage Holders Have Moved Away From The Cliff Edge” – TD Economics
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RBC Capital Markets head of global energy research Greg Pardy reviewed his top picks in the energy sector,
“On average, we are broadly in-line with FactSet consensus on equivalent production and capital spending expectations. On balance, we think the majority of producers will stay the course next year in regards to capital discipline, strengthening balance sheets, pursuing modest organic production growth and displaying an ongoing commitment to shareholder returns—with an emphasis on share buybacks. We continue to favor energy companies with cash flow leverage towards oil-weighted segments. In our eyes, energy producers are well equipped to handle commodity price volatility given their strong balance sheets while maintaining shareholder return optionality. Our favorite senior producer remains Canadian Natural Resources, with Suncor Energy our favorite integrated, and MEG Energy our favorite intermediate producer"
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Diversion: “Welcome to Google’s nightmare: US reveals plan to destroy search monopoly” – Ars Technica