Canadian Infrastructure: Credit Suisse Previews Q1 Earnings
Credit Suisse has released a Q1 earnings preview for Canadian Infrastructure companies and revised estimates for Emera Inc. (EMA.TO), Fortis Inc. (FTS.TO) and TransCanada Corp (TRP.TO).
Quarterly earnings preview: "Going into this round of quarterly results, we continue to prefer companies generating relatively strong cash flows in most economic scenarios, long-term underlying asset value, reasonable relative and absolute valuations and manageable external capital market needs (for both equity and fixed income). Aside from a chase for dividends and income oriented product, we do not believe the sector will face a significant multiple expansion or notable near-term upward momentum. Over the next few years, we believe many companies within the sector are extremely well positioned for meaningful cash flow, dividend and earnings growth."
Selected specifics: "We continue to believe quarterly results are not a major driving force for a considerable portion of our infrastructure universe. Yet, in our view, this earnings season may provide more insight on a selection of issues for several companies within our coverage universe, including: (a) an interesting Alberta power market given the Sundance 1 and 2 outage [impacting] Capital Power Corp. (CPX.TO), TransAlta Corp (TA.TO) and TransCanada; (b) restructuring and M&A opportunities [involving] Brookfield Infrastructure ( BIP ), Emera, Enbridge (ENB.TO) and Fortis); (c) the ongoing development of North America's crude oil pipeline system (ENB and TRP); (d) new infrastructure build supporting some large commodity projects ( BIP ); (e) dividend appeal with potential for an adoption of cash flow payout targets ( ENB ); (f) direct pension fund investment longer-dated assets; (g) some companies transitioning to new accounting standards; and, (h) favourable credit market conditions for long-dated assets."
Corporate strategy and development a focus: "For most of our universe, we continue to place little emphasis on the quarterly results and focus our efforts on incremental information that either supports or detracts from each investment thesis in this long cycle infrastructure focused sector."