Barlow’s research roundup: Big winners of fed’s new industrial defence strategy from RBC analyst

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

CAE a major beneficiary

RBC Capital Markets analyst Jamie McGarragle identified some big potential winners from the federal government’s newly announced defense industrial policy,

“Canada’s government is launching a $6.6-billion defence-industrial strategy aimed at reducing reliance on U.S. military equipment and bolstering domestic defence capabilities. The initiative prioritizes Canadian sovereignty, particularly in Arctic protection, and targets 125,000 jobs over the next decade … Our view: We view the announcement as positive for our coverage given the plan to increase defence contracts awarded to Canadian firms from 50% to 70%, boost defence exports by 50%, and grow industry revenues by over 240%. A focus on Canadian procurement and supply chain development should directly benefit our aerospace coverage and provide the necessary investment to expand homegrown production and capabilities. We believe several Canadian defence names are well positioned to benefit from this initiative: CAE is viewed as the top beneficiary with potential for meaningful growth in its defence book-to-bill ratio; Bombardier could see accelerated demand toward its 2030 goal of $1–$1.5 billion in defence revenue; Exchange stands to gain through its PAL Aerospace division and Arctic surveillance focus; and Chorus’s Voyageur segment may benefit from increased surveillance opportunities”

Nat gas forecasts raised

BofA Securities global commodity strategist Clifton White raised his mid-term price forecasts for natural gas,

“During the peak cold, we estimated the salt inventories could drop below 100 Bcf, which would be the lowest levels since 1Q14. But on Feb 2 when mild temps showed up in the forecasts that would halt the rapid depletion in salt stocks, the prompt gas futures contract lost more than $1/mmbtu, its largest single day sell-off ever. Now the gas curve is nearly back to pre-[winter storm] Fern levels, as if nothing really happened … The mid-January storage surplus of 177 Bcf has quickly flipped to a deficit of 130 Bcf. We believe spreads like April/January should tighten as storage capacity holders rush to refill inventories this spring to take advantage of the wide spreads. The power sector is likely the most efficient means to balance the US natural gas market over the coming months. As such we raise our summer Henry Hub price forecast to $4/mmbtu a level we feel would motivate the power sector to switch from gas to coal-fired generation to put gas storage on pace to end the summer with at least 3.8 Tcf … Even though gas rigs have increased YTD and E&Ps have a history of growing production in front of demand, we cautiously raise our 2027 price forecast to $4/mmbtu from $3.75/mmbtu prior to keep E&Ps on pace for sufficient gas supply next winter. In fact, some E&Ps are already planning to be “data center” ready (see Comstock planned outspend in ’26 and Antero 4Q25 review). Given the long history of gas E&Ps outperforming expectations, the US is likely left with too much natural gas supply in 2027, but given the recent gas price spike we believe at this point it is better to be safe than sorry”

Rapidly changing obesity drug market

Scotiabank analyst Louise Chen noted seven ways that the obesity drug market is set to change,

“#1. If LLY lowers the price of orforglipron to match/undercut NVO’s Wegovy pill, there could be concerns about whether LLY can make its 2026 [profit guidance] and if obesity drug prices are deteriorating faster than anticipated. #2. If PFE, AMGN and others enter the obesity market with lower prices/peak sales aspirations, there could be downside risk to Street expectations of ~$150B market for obesity drugs. #3. Compounded obesity drugs could continue to be a headwind to branded drug growth. #4. Readouts from new drugs (PFE, AZN), at ADA [American Diabetes Association conference), could drive the Street to rethink who comes out on top. #5. M&A will continue to reshape the environment with companies still interested to expand/get into the space and companies de-prioritizing assets (i.e., GILD). #6. Companies are getting creative about how to expand their obesity franchises (LLY’s TOGETHER-PsA, REGN, obesity + LDL lowering drugs, ABBV, obesity+aesthetics). #7. The size of the international market is still TBD, especially in China where domestic drugs may take the lead”

Bluesky post of the day

Diversion

“Bacteria Frozen Inside 5,000-Year-Old Ice Cave Is Crazy Resistant to Antibiotics ” - Gizmodo