I only included the companies that I own. GLTA
Scotia Capital analysts Robert Hope and Justin Strong think the earnings outlooks for Canadian utilities and energy infrastructure companies “remain resilient.”
However, they lowered their target prices for stocks in their coverage universe by an average of 11 per cent on Thursday to account for a higher-yield environment and moderating commodity prices.
“We like the Alberta power producers going into the quarter given the strong pricing environment as well as the fact that we believe they are less interest rate sensitive than other companies in our coverage universe,” they said. “We continue to like the gas focused midstream companies, Keyera and Pembina, given the favourable outlook for volumes. The renewable power group has seen its valuation decrease since mid-September (largely share price driven) and have yet to test a lower bound. That said, we continue to see a number of tailwinds for the group that are supportive of higher valuation. Our favourite renewable names are Boralex, Brookfield Renewable, and Northland Power.”
The analysts’ changes were:
- Algonquin Power & Utilities Corp. ( “sector perform”) to US$13 from US$16.50. Average: US$15.75.
- Brookfield Renewable Partners LP ( “sector outperform”) to US$38 from US$42. Average: US$40.31.
- Tidewater Midstream and Infrastructure Ltd. ( “sector outperform”) to $1.50 from $1.75. Average: $1.76.
“The implied share price returns to our target prices are currently higher than normal,” they said. “This is not surprising given the significant downdraft in share prices since the start of September. At this point, we do not make any changes to our ratings as the market has a significant number of “cheap” stocks. That said, we are warming up to Algonquin as it is trading at 13.2 times 2023 estimated P/E, which is well below its 10-year average of 20.5 times forward P/E. That said, we have not seen a pickup in investor inbounds on Algonquin as investors are focused on the more defensive pure-play utilities. We could get more positive on the name if the December Investor Day provides additional clarity on the funding outlook as well as the path forward with the Kentucky Power acquisition.”