Top picks in regulated utilities from a RBC analyst

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

Utilities profits surprise top the upside

RBC Capital Markets analyst Maurice Choy is pleasantly surprised by the earnings results from domestic regulated utilities,

“Our view: The Q3/25 results represented another milestone in highlighting the Canadian regulated utilities’ earnings durability, with results that were broadly in line to stronger-than-expected relative to our estimates and consensus, and with the companies at least reaffirming their previously[1]communicated near-term growth outlooks. Notably, some of the utilities (including Fortis, Hydro One, and Brookfield Infrastructure) have communicated stronger growth trajectories that are underpinned by their respective abilities to capture many favourable secular themes related to the rising North American energy demand and the importance of grid resilience. We believe the sector’s durable and low-risk growth, coupled with sustainably rising dividends, should offer investors a reliable high-single digit to low double-digit total return over the long-term. Indeed, an area that warrants continued monitoring on a local level will be how the industry balances keeping bills affordable while ensuring a fair and timely return on and of capital. Stock-wise, we highlight our Outperform-rated utility stocks, which include AltaGas, Brookfield Infrastructure, and Emera”

Winners from government spending projects

Scotiabank analyst Patrick Bryden identified the winners from prime minister Carney’s second tranche of infrastructure investment projects,

“Prime Minister Carney has announced the second tranche of projects to help strengthen Canada’s economy … this announcement followed the recent federal budget and critical minerals initiatives and was accompanied by an expansion of the Major Projects Office (MPO) … The inclusion of liquified natural gas (LNG), transmission and trade corridors, critical minerals opportunities, and Arctic hydroelectric power seeks to spur economic development and sovereignty objectives. There are approximately 30 businesses identified in this report with direct (operational) and indirect (design, construction, infrastructure, and transportation) exposure to the seven projects … The North Coast Transmission Line (NCTL) and Northwest Critical Conservation Corridor (NCCC) (Northwest British Columbia and the Yukon) offer enhanced access to world-class geology and critical minerals opportunities in the Golden Triangle region at lower costs … Companies with exposure include Centerra Gold Inc. (CGAU), Newmont Corporation (NEM), Skeena Resources Limited (SKE), Thesis Gold Inc. (TAU), and Teck Resources Limited (TECK) ... ‘Picks and shovels’ opportunities, in our view, are greatest for engineering and construction companies AtkinsRealis Group Inc. (ATRL), Stantec Inc. (STN), and WSP Global Inc. (WSP), while for provision of heavy equipment we note Finning International Inc. (FTT).

AI at a Reasonable Price

Citi strategist Drew Pettit has developed a new investment theme that interests me – AI at a Reasonable Price,

“Our overarching view remains structurally bullish, but we anticipate a more volatile bull market. Therefore, we focus on five stock selection narratives for late 2025 and early 2026: AI at a Reasonable Price, Productivity Enhancement/Positive ROE Trend, Inflecting Growth, Return on Growth Capex, and High Earnings Sharpe. We view AI at a Reasonable Price and Positive ROE Trend as core narratives, key to fundamental resilience. For satellite positions, Inflecting Growth is a focus for cyclicals, Return on Growth Capex targets high growth companies, and High EPS Sharpe provides a balanced defensive offering”

Mr. Pettit highlighted Amazon.com, GoDaddy Inc. and Micron Technology from the AI at a Reasonable Price stock screen Other companies that might interest domestic investors include Adobe Inc., Dell Technologies, Corning Inc., Paypal Holdings and Sandisk Corp.

Bluesky post of the day

Diversion

“These 7 movie and TV trailers are blowing up this week — here’s where to watch them” – MakeUseOf