Every month Investor’s Digest of Canada surveys securities analysts’ opinions and recommendations for over 1,000 Canadian stocks. Here are two of the survey’s top 10 picks that garnered the most ‘buy’ recommendations—a Calgary-headquartered oil and gas stock and a Toronto-headquartered engineering and construction stock.
When Enerplus Corporation (TSX—ERF) announced its fourth quarter of 2018 production numbers on Jan. 25, 2019, the oil and gas stock’s tally was at the high end of its guidance.
The company also announced its exploration and development capital of between $565 million and $635 million for 2019 as well as a three-year outlook through to 2021.
Production for the final quarter of last year was about 97,800 barrels of oil equivalent (BOE) per day, including liquids of 54,400 barrels per day, while full-year 2018 annual production was approximately 93,200 BOE per day, including liquids of 49,900 barrels per day.
As for its capital budget, Enerplus explained that its capital spending plan is based on a US$50-to-US$55 per barrel West Texas Intermediate (WTI) oil price environment. While it has allocated 80 per cent of its 2019 capital budget to its North Dakota development, it has only earmarked 7.5 per cent of its 2019 capital budget across its Canadian operations. It will also use its capital budget to work in the Marcellus Formation (7.5 per cent) and the Denver-Julesburg Basin (5.0 per cent).
Enerplus is rated an ‘outperformer’
Its 2019 production guidance will be in the range of 94,000-to-100,000 BOE (barrels of oil equivalent) per day, including 52,500-to-56,000 barrels per day of liquids, according to the company.
In a Jan. 25, 2019 research note, Calgary-based CIBC securities analysts Jamie Kubik and Matthew Little say that Enerplus’ capital budget and three-year plan require CIBC to tweak its estimates. They say that the update announcement confirms their high regard for the company.
“All told, we see ERF maintaining its highly competitive investment appeal within the Canadian energy sector over the course of 2019 due to a strong balance sheet, attractive valuation, competitive growth rate, and jurisdictional tailwinds within its assets,” say Messrs. Kubik and Little, who stick with their $22 target share price. “We maintain our ‘outperformer’ rating and continue to see the stock as a top idea.”
All six analysts who cover Enerplus rate the company a ‘buy’. This puts the company in a five-way tie for sixth place among our top-10 buys.
Engineering & construction stock also a unanimous pick
Late last year, Aecon Group Inc. (TSX—ARE) announced the completion of the sale of its contract mining business to North American Construction Group Inc. for $199.1 million.
The divested business provides overburden removal and environmental reclamation services through a dedicated fleet of earth-moving equipment, primarily in the oil sands in Fort McMurray, Alta.
The Toronto-based construction and infrastructure development company also announced in early November 2018 the departure of a prominent member of its board of directors. Specifically, Aecon said that Brian Tobin, the former premier of Newfoundland and Labrador as well as a former federal cabinet minister with the Jean Chrétien government, would depart. The announcement followed Mr. Tobin’s appointment as vice-chair of BMO Financial Group. Mr. Tobin joined Aecon’s board in 2005, most recently serving as lead director.
On Nov. 1, 2018, meanwhile, Aecon announced that a joint venture between the company (40 per cent) and Traylor Bros, Inc. (60 per cent) had been awarded a $267 million contract by Metro Vancouver (Greater Vancouver Water District) for the Second Narrows Water Supply Tunnel project in British Columbia.
Aecon Group is rated a ‘strong buy’
Montreal-based Industrial Alliance Securities analysts Neil Linsdell and Dimitri Troulis say in a Feb. 1, 2019 research note that Aecon is one of their favourite stocks, and that the company’s outlook is positive.
“The outlook for 2019 is positive, with areas of strength in Aecon’s Infrastructure segment and higher margin nuclear business expected to outweigh the impact of a weaker environment for new large commodity and oil related projects (in the Industrial segment),” say the analysts. All segments continue to bid on opportunities that should grow the record $7 billion backlog, with the goal of improving profitability, with submissions for request for proposals and qualifications for projects worth approximately $8 billion and approximately $20 billion, respectively. We also believe the recent appointment of industry veteran Jean-Louis Servranckx as CEO should enhance relationships with international partners.”
They stick with their ‘strong buy’ recommendation and $23 target share price.
All six of the analysts who cover Aecon rate the company a ‘buy’. This puts the company in a five-way tie for sixth place on our top-10 ‘buys’ list with Enerplus Corp., Bombardier Inc., Vista Energy Ltd. and Seven Generations Energy Ltd.
This is an edited version of an article that was originally published for subscribers in the February 22, 2019, issue of Investor’s Digest of Canada. You can profit from the award-winning advice subscribers receive regularly in Investor’s Digest of Canada.
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