Inside the Market’s roundup of some of today’s key analyst actions
RBC Dominion Securities analyst Greg Pardy expects third-quarter financial results from Canadian energy producers to display “much stronger financial performance amid robust upstream-downstream commodity price tailwinds along with an ongoing commitment to capital discipline, net debt reduction and shareholder return.”
“Our third-quarter outlook for MEG incorporates bitumen production of 102,000 barrels per day , up 19 per cent sequentially following planned turnaround activities at Christina Lake completed in the second quarter,” he said. “We peg MEG’s third-quarter bitumen realization at $98/bbl, with all-in operating costs at $8.28/bbl and royalty rate of 26 per cent .
“We are imputing 6-per-cent CAGR from 2022 onwards at 16-per-cent EBITDA margin, in line with guidance ,” he said. “Lumber is another lagging sub-vertical at negative 5-per-cent CAGR . The above dynamics results in 2025 EPS estimate of $5.50 per share .
“Automation, reshoring, and historic infrastructure investment are structural trends still in their early innings,” he said. “The effects of these tailwinds are most pronounced in the U.S., and STN remains our top pick in the E&C space given its 50-per-cent-plus topline exposure to this market in addition to the company’s expertise in the water and environmental services vertical.
Analyst: “STN’s Water expertise and U.S. skew will continue to benefit the co in H2/23E. 38-per-cent year-to-date share price increase vs. flat for TSX is putting a hurdle ahead of Q3/23 as shares have had a tendency to sell off post prints. We would be using any downdraft opportunity to add as the market will be focusing on next strategic plan to be unveiled in early Dec 2023. M&A provides another capital deployment optionality over the forecast horizon with leverage now sitting below 1.
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