RBC analyst’s stock-by-stock earnings preview in the dividend-heavy energy infrastructure sector

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

Only one energy infrastructure stock sees upward earnings revision

RBC Capital Markets analyst Robert Kwan previewed earnings reports in the income-oriented energy infrastructure sector, raising guidance for only one stock in his coverage and reducing the rest,

“Boralex (BLX): We have reduced our EBITDA estimates to $121 million for Q3/25 (down from $131 million) to reflect our expectation of below-average wind resources mainly in North America. Brookfield Renewable (BEP): We have decreased our FFO/unit estimate to US$0.46 for Q3/25 (down from US$0.48) due to below-average North American hydrology. Emera (EMA) and Enbridge (ENB): We have lowered our Q3/25 estimates for Emera’s EPS to $0.83 (down from $0.87) and Enbridge’s EBITDA to $4.342 billion (down from $4.438 billion) mainly from seasonality profile changes of NMGC (Emera), Liquids Pipelines and U.S. Gas Distribution (Enbridge). Fortis (FTS): We have reduced our Q3/25E EPS to $0.86 (down from $0.89) partly due to the US$5 million penalty related to the Wappingers Falls event at CH and the recent sale of FortisTCI. Gibson Energy (GEI) and Keyera (KEY): We have lowered our Q3/25 EBITDA forecasts for Gibson Energy and Keyera to $146 million (down from $149 million) and $287 million (down from $320 million), respectively, to reflect the less favourable commodity trading environments for Marketing. • Hydro One (H): We have raised our Q3/25 EPS estimate to $0.66 (up from $0.63), to mainly reflect favourable weather that should drive a higher Ontario 60-minute peak demand year-over-year. Northland Power (NPI): We have reduced our Q3/25 EBITDA estimate to $252 million (down from $262 million) to reflect our expectation for below-average offshore wind generation (grid outage). TC Energy (TRP): We have lowered our EPS estimate in Q3/25 to $0.75 (down from $0.81), due to a negative revaluation of U.S. dollar-denominated loans on Sur de Texas, and lower AFUDC. TransAlta (TA): We have lowered our EBITDA forecast in Q3/25 to $260 million (down from $285 million), to primarily reflect lower-than-anticipated gas-fired power production during the quarter.”

Private equity sector alarmingly gigantic

BofA Securities head of global research Candace Browning highlighted a report that I find concerning,

“private companies are increasingly driving innovation. Haim Israel notes that if the private market were a country it would represent the world’s second-largest economy, with total private capital AUM reaching $22tn in 2024, more than double 2012 levels. The number of US-listed companies have halved since 2000, while venture-backed firms grew 25-fold. Startups are remaining private for about 16 years, 33 per cent longer than a decade ago, partly to avoid rising regulatory costs as well as the time spent on financial regulation paperwork every year – 425mn labor hours annually – enough to build 12 Great Pyramids of Giza. Though Haim isn’t recommending private companies, he observes that, despite the opacity, private equity has outperformed the S&P 500 by 6 per cent annually over the past decade. He also explores 16 private firms valued at $1.5tn, over 1 per cent of global GDP, showing breakthroughs beyond public exchanges”

I believe that the vast majority of private companies are fairly valued by their fund managers. But if even one per cent of holdings’ value is overstated there could eventually be a panic that affects the entire sector which, as BofA points out, is enormous.

Canada’s investment slump

BMO senior economist Sal Guatieri detailed the domestic investment drought,

“Over the past decade, real spending on M&E [machinery and equipment] fell 13 per cent in Canada, but rose 27 per cent in the U.S.—a gap of 40 percentage points. And, spending was already running two percentage points of GDP higher in the U.S. at the start of the period. While Canadian companies now spend 42 per cent more on computers than in 2015, they halved their investment in other industrial machinery. In contrast, U.S. firms more than doubled spending on computers and increased purchases of other machinery by 17 per cent … One bright spot on the Canadian investment landscape is intellectual property products (IPP). Led by a doubling in software investment, IPP spending grew 54 per cent in the past decade … The long slump in M&E spending partly explains Canada’s lost productivity decade. Averaging a mere 0.3 per cent y/y since 2015, growth in labour productivity slowed from 1.0 per cent in the previous decade and was just a sixth of the U.S.’s 1.8 per cent rate … Not surprisingly, Canadian living standards have languished in the past decade”

“Focus: Canada’s Business Investment Drought” – BMO Economics

Bluesky post of the day

Diversion

“Grab a blanket and a friend — these horror movies are nightmare fuel” – MakeUseof