BMO analyst’s top picks in yield-rich energy infrastructure sector

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

Outlook revised lower for some infrastructure stocks

BMO analyst Ben Pham updated his outlook in the yield-rich energy infrastructure sector,

“Q3/25 earnings season kicks off on October 29 with CPX. We have made estimate changes to 80 per cent of our coverage (mainly reductions) and expect majority of results are in-line/misses. Following our analysis of public data sources, proprietary models, and detailed discussions with our covered companies, we point to potential Q3/25 beats from H and ACO.X and potential quarterly misses from EMA, TA and ENB. There are no rating changes, but target revisions for CPX (to $79 vs. $70 on higher AB power prices and Midland recontract; still OP), GEI (to $26 vs. $27 on lower Marketing; still Mkt), and TA (to $27 vs. $21 on higher AB power prices; still OP)”

B.C.-to-China an increasingly busy oil route

RBC Capital Markets head of global energy equity research Greg Pardy quantified the increasingly busy B.C.-to-China oil route,

“The diversification benefits provided by the Trans Mountain Pipeline Expansion (TMX) are perhaps best exemplified by China’s arrival as a mainstay destination for Canadian crude loadings. With 138 direct shipments (amounting to over 69 million barrels of crude) having travelled from Burnaby to China/Hong Kong since January 2024, a trend of Asia-bound tanker traffic has no doubt taken shape. Based on our data analysis, 27 tankers departed from the Westridge Marine Terminal in September 2025, rising from 25 in August. Shipments from Trans Mountain remain concentrated to China and California and are continuing to lend physical support to tighter (and less volatile) WCS-WTI spreads”

The narrowing of the spread between WTI and WCS crude is beneficial to all domestic oil producers. Mr. Pardy has “outperform” ratings on Ovintiv Inc, Suncor Energy Inc, Canadian Natural Resources Ltd., Baytex Energy Corp, Athabasca Oil Corp, Cenovus Energy Inc and MEG Energy Corp.

Credit markets becoming a concern

BofA Securities investment strategist Michael Hartnett’s weekly Flow Show report included some interesting numbers in its usual punchy style,

“Zeitgeist: “K-shaped economy goes pear-shaped if asset prices drop and hit rich.” Zeitgeist: “Money market yields going to drop at least 100bps next couple of quarters, so do I buy Treasuries when government owes $38tn, corporate bonds with spreads at 20-year lows, stocks trading on a 40x CAPE, or gold that’s just gone vertical? Tricky.” Tale of the Tape: 123 global rate cuts YTD, global stock market cap up $20.8tn, $170bn for every rate cut! Big rate cuts, frothy animal spirits… number of leveraged equity ETFs up from 470 to 701 YTD, and 5x levered single-stock ETFs coming soon. The Price is Right: Fed cutting but “Krunchy Kredit” cracks spreading (KIE, [S&P Insurance ETF], KRE [S&P U.S. regional banks ETF] follow PSP [private equity] … ); Fed will be forced to cut more aggressively if banks (BKX [broad U.S. bank ETF] 400bps) signal deeper deleveraging/liquidation”

Housing markets in Canada

BMO senior economist Sal Guatieri discussed the vast difference between regional housing markets,

“Quebec City has one of the hottest housing markets in Canada. Its benchmark price rose 17 per cent in the past year to September and a hefty 35 per cent in the past three years to a record $431,800. Yet, the city remains one of the least expensive in the country relative to household income. Near the opposite end of the housing spectrum, Greater Toronto prices have fallen for ten straight months to $971,500, down 6 per cent in the past year and 23 per cent since peaking in February 2022. Of note, the ratio of prices has fallen from a peak of 4.0 to 2.3, which is almost precisely the mean in the decade prior to January 2015, just before Toronto’s market turned manic. This could mean that the diverging trends in the two cities—rising sharply in one and sagging in the other—are in the later innings. Then again, one is still affordable, while the other is trying to get there”

Bluesky post of the day

Diversion

“A Staggering Number of Americans Are Now Considered Obese Under New Definition” – Gizmodo