Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO energy analyst Randy Ollenberger reviewed profit results for the sector and reiterated top picks,
“Third-quarter reporting saw the oil and gas group deliver better-than-expected results. Suncor and MEG have started returning 100% of free cash flow to shareholders while Canadian Natural is expected to revert to returning 60% of its post-dividend free cash flow once the Chevron asset acquisition closes in Q4/24. Despite relatively strong quarterly results, share price performance has been relatively muted, largely due to ongoing geopolitical uncertainty. We expect crude oil prices to remain range-bound for the near term but continue to see good value in the group, which could generate roughly $31 billion of free cash flow in 2025 at the current strip, with ~$28 billion going to shareholders. This translates to a compelling delivered yield of ~7.6% … SU’s material beat stood out amongst the large caps, followed by ARX, BTE and IMO delivering the biggest positive surprises, while CVE posted the largest miss. For the SMID group, NVA, LGN, and PXT reported the largest beats while GFR and RBY reported the largest misses”
Mr. Ollenberger’s stocks that are listed among BMO’s top 15 Canadian picks are Cenovus Energy Inc. (CVE-T), NuVista Energy Ltd. (NVA-T), Canadian Natural Resources Ltd. (CNQ-T) and ARC Resources Ltd. (ARX-T).
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CIBC economists Benjamin Tal and Katherine Judge forecast the domestic residential real estate market for 2025,
“The tale of the Canadian housing market in 2025 is a tale of two markets. The low-rise segment will be the first to respond to lower mortgage rates, with still historically low inventories translating increased demand into higher home price inflation. The high-rise segment has been in recessionary territory for the past few quarters and is likely to remain under water for most of 2025, as record-high completions will continue to chase reduced investors’ appetite. That should put continued downward pressure on resale condo prices in the coming year, while slower population growth and affordability erosion suggest that we have already reached peak rent inflation. However, buyers’ market conditions will not last for long. By mid-2026, a lack of supply due to the current drought in the condo pre-sale space and an extremely slow increase in purpose built activity will clash with increased demand due to lower interest rates and recent changes to mortgage regulations, resulting in higher price pressures”
“Canadian housing – countdown to liftoff” – CIBC Economics
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RBC Capital Markets head of U.S. equity strategy Lori Calvasina offered top 10 thoughts about U.S. equities for 2025,
“We’re running through our thoughts on the 2025 outlook for US equities and the top 10 things we’re thinking about as the new year comes into view. All 10 are reviewed in detail below. Three highlights: First, we are starting the new year with a YE 2025 target of 6,600 (our base case). We run through the math that gets us to that base case as well as our bear case. Second, our sentiment and valuation work keep us concerned about a near-term/short-term pullback, but also help us understand how the path for stocks is likely to be higher in 2025. The biggest issue we’re debating is how strong the economy will be in 2025. Third, we give Value an edge over Growth next year, but expect continued choppiness in both the Growth/Value and Small Cap/Large Cap trades. We outline things we’re looking for that could get us more constructive on Small Caps … #1: We are starting the new year with a YE 2025 S&P 500 price target of 6,600 … 2: The sentiment setup is modestly constructive on a 12-month view, but has been highlighting the potential for a near-term pullback … 2: The sentiment setup is modestly constructive on a 12-month view, but has been highlighting the potential for a near-term pullback … #4: The earnings outlook remains supportive of further appreciation in the S&P 500 in the year ahead, with a few hurdles to overcome … #5: US equities may soon lose their appeal relative to bonds, but haven’t done so quite yet … #6: The US economy is at an important crossroads from a stock market perspective … #7: Elevated interest rates may soon start to pinch more broadly … #8: The political backdrop presents both tailwinds and possible headwinds for stocks in the year ahead … #9: We give an edge to Value over Growth, and the broadening of market leadership, but think it’s a close call for 2025 and expect more choppiness here … #10: We expect the Small/Large trade to stay choppy for now, as was the case from 2016-2018
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Diversion: “Alcohol estimates” - Marginal Revolution