In a recent analysis of market strategies, TD Cowen analyst Aaron MacNeil downgraded ratings for several prominent Canadian midstream energy companies. The companies affected are Enbridge Inc. (ENB), Pembina Pipeline Corp. (PPL), and TC Energy Corp. (TRP), now receiving a “hold” rating compared to the previous “buy” status.
Downgrades and Upgrades in Canadian Energy Sector
This decision comes after a strong performance in share prices year-to-date. MacNeil believes that the investment thesis for these companies has “played out,” indicating that the expected long-term growth has been reflected in current valuations. He expressed concerns that the market has already factored in medium-duration (3-5 years) growth for these firms.
Key Valuation Insights
According to MacNeil, TC Energy is projected to reach its 10-year average valuation by 2030, Pembina by 2029, and Enbridge by mid-2028. He maintains that Keyera Corp. is the only remaining “buy” in this group, due to its expected growth potential following a recent transaction.
- Enbridge Inc. (ENB): Target raised to $72 from $70; market average $73.12.
- Pembina Pipeline (PPL): Target raised to $62 from $59; market average $58.38.
- TC Energy (TRP): Target raised to $88 from $84; market average $86.
In contrast to the downgrades, other analysts have shifted their targets for Enbridge. Jefferies’ Sam Burwell also downgraded Enbridge to “hold” from “buy” but raised the price target to $76 from $71. Notably, various firms, including RBC and Raymond James, have adjusted their targets for Enbridge upwards, with the new price targets averaging around $77.
Canadian Banks and Overall Market Insight
Moving onto the banking sector, analyst Gabriel Dechaine of National Bank Financial sees potential for a positive uptick in earnings per share (EPS) revisions in the fiscal year 2026. Dechaine raised EPS projections across Canadian banks by an average of 1% due to enhanced forecasts for capital markets and wealth management revenue. However, he indicated the need for improved loan growth to achieve realistic return on equity targets.
Forecasts for Canadian Bank Stocks
- Royal Bank of Canada (RY): Target raised to $241 from $235.
- Toronto-Dominion Bank (TD): Target raised to $138 from $134.
- Bank of Montreal (BMO): Target raised to $186 from $181.
Overall, analysts express a cautiously optimistic view for Canadian banks amid challenging market conditions, while also emphasizing targeted growth areas. As market conditions evolve, investor sentiment will likely depend on these revised projections and the ability of these companies to execute on growth strategies effectively.
