Adjusted Ratings In a separate research report released Monday reviewing fourth-quarter earnings season for TSX-listed energy infrastructure companies, Mr. Foscolos downgraded a trio of stocks based on recent share price performance.
“Heading into Q4/20 earnings, our coverage universe had begun to rebound as commodity prices started to reach pre-pandemic levels,” he said. “Overall, we classify the Q4 results reported over the last month as mostly in line. Post reporting, our coverage for the most part mirrored the TSX apart from a few company-specific events causing those stocks to diverge from their peers.
“Thus far in 2021, with vaccines continuing to be distributed internationally, investors are clearly factoring in an economic recovery in the near future barring any setbacks. As a result of the anticipated economic recovery, interest rates have seen a recent spike with fiscal and monetary policies used throughout the pandemic leading to increasing inflation risk, but markets have advanced. WTI closed last week at $65.61, slightly down from last week.”
Mr. Foscolos lowered both Pembina Pipeline Corp. (
) and
Gibson Energy Inc. (
) to “hold” recommendations from “buy” previously.
His target for Pembina shares rose to $39 from $37. The average on the Street is $38.33.
“Pipelines posted mainly in line results with PPL being the only stock that outperformed the TSX post reporting,” he said.
The analyst maintained a $23.50 target for Gibson, which falls just short of the $24.06 average.
He downgraded AltaGas Ltd. (
) to “buy” from “strong buy” with a $24.50 target, up from $24 and above the $22.59 average.
“Overall, this [midstream] sector had differing returns compared with the TSX during Q4/20, with IPL and GEI posting negative returns while KEY and ALA outperformed,” said Mr. Foscolos. “Q4/20 financial results were overall in line with consensus with GEI posting a slight miss. YTD, this sector has performed very strongly with all stocks outperforming the TSX.”
Mr. Foscolos also made these target adjustments:
- Enbridge Inc. (
, “buy”) to $54 from $52. Average: $51.39. - TC Energy Corp. (
, “strong buy”) to $72 from $70. Average: $68.50. - Keyera Corp. (
, “buy”) to $29 from $28. Average: $28.22. - Parkland Corp. (
, “buy”) to $49 from $48. Average: $48.54.
“Q4/20 results in our Energy Infrastructure coverage universe were generally in line with expectations with the occasional variation,” said Mr. Foscolos. “Midstream stocks had bifurcated reactions with GEI and IPL outperforming the TSX post reporting, but ALA and KEY performed in line. KEY’s underperformance post reporting Q4 results is mathematically correct but misleading as one of its peer stocks, IPL, surged post the announcement of the BIP Offer. Pipelines posted mainly in line results with PPL being the only stock that outperformed the TSX post reporting. Utilities generally performed in line with the TSX post reporting. CU was the worst performer post-results as the stock retraced some of its gains after having a strong start to the year. SPB has continued to outperform in Fuels Distribution, with results coming in line with estimates for Q4.”