Scotiabank analyst Robert Hope provided his top picks in the utilities and energy infrastructure sector,
“Overall, our estimates are below consensus (approximately 2 per cent on average) as we see weather, generation, and higher corporate costs weighing on results. We have made some minor tweaks to our models heading into the quarter, but nothing too notable. We are particularly below consensus for: 1) CPX (11 per cent) due to soft power pricing and lower utilization, 2) EMA (5 per cent) due to weather and regulatory lag, and 3) AQN (10 per cent) due to weak renewable generation and higher costs. We are 2 per cent ahead of consensus for KEY given our expectation of another strong marketing quarter … in the coming months we expect to see a number of asset sale, project, and contracting announcements that could be well-received by the market. Of the sub-sectors we follow, we note that investor sentiment is most positive for the mid-sized gas midstream names. We share this view and believe the group has room for continued positive estimate revisions. Overall, we like the midstream group over the utility group at this point. Our favourite names are AltaGas, Brookfield Renewable, and Gibson Energy … Investor sentiment on the mid-sized gas-focused midstream names (KEY, PPL, and ALA’s asset exposure) continues to turn positive given the expectation of medium-term volume growth associated with LNG Canada ramping up through 2025. We favour these names given they also have reasonable leverage and payout ratios, and can equity self-fund their growth”