ATB Raise Target A recent rally in Canadian energy services companies is supported by reduced risk profiles across the sector, according to ATB Capital Markets analysts Tim Monachello and Waqar Syed.
“Canadian energy services have been fast out the gates in 2024 with ATB’s custom Canadian energy services index up 10 per cent year-to-date, vs the TSX composite which is up roughly 1 per cent,” they said. “The strong performance of energy services companies has been alongside a rally in crude prices that had seen WTI rise over US$78 per barrel before capitulating back toward US$72/bbl. While we believe this rally contributed to improving sentiment, we also believe that fundamental improvements in risk on both an absolute (improved balance sheets) and a relative basis (significantly improved ex ante beta vs the index) provide justification for multiple expansion across the sector .... Overall, we believe there remains meaningful upside for energy services stocks, and we recommend investors overweight the sector.”
Heading into fourth-quarter 2023 earnings season, the analysts maintained their view that outperformance will come from companies that possess “some combination of minimal U.S. cyclical exposure, high-cash returns to shareholders, and company with leverage to alpha opportunities.”
North American Construction Group Ltd. (NOA-T, “outperform”) to $46 from $44. Average: $43.83.