Leading analysts provided deep-sector insights in energy and diversified sectors

Calgary – ATB Capital Markets, the capital markets arm of ATB Financial and ATB Securities Inc., hosted its 12th Annual Institutional Investor Conference in Toronto last week, which brought together more than 30 management teams from multiple sectors.

The insights of these business leaders, alongside the deep sector knowledge of ATB Capital Markets’ research analysts, provided an outlook on the challenges and opportunities to expect in 2024, focusing on energy, transportation, engineering and construction. 

“Much like our previous conferences, participants this year left with valuable insights from discussions with management teams, along with our analysts’ industry outlooks on the year ahead,” said Darren Eurich, CEO of ATB Capital Markets. “As we kick off 2024, investors stand at the crossroads of cautious optimism and recessionary shadows. With central banks potentially pivoting towards rate cuts and inflation inching towards target ranges, the financial landscape is poised for a delicate dance between economic cooling and renewed market vigour. Our optimism remains measured but strong as we stand committed to the vital industries in which we invest. 2024 is set to be a year of growth, continued investment in industries proving success year-over-year, and a renewed state of economic normalcy.”

For ATB Capital Markets’ full list of 2024 Outlook reports, click here.

Energy Outlook

Energy Infrastructure: Discussions highlighted the vast opportunity for capital allocation in 2024 and the coming years. In terms of energy transition and security, panellists discussed the major role market access and supply play in meeting customer demand. 

Energy Services: In the U.S., panellists expect a relatively flat rig count from the current levels and have limited visibility into additional rig releases, creating market uncertainty. In Canada, companies are seeing increased activity for their rigs and expect margins to increase y/y in 2024. Internationally, panellists were bullish on the Middle East, and following a change in government were bullish on Argentina as well. 

Exploration & Production: Expectations continue for a strong medium and long-term investment appeal in the Canadian upstream and integrated oil and gas sector. Markets are navigating near-term volatility and the impacts of macroeconomic challenges.

“Canadian drilling and pumping activity are on a multi-year secular growth trajectory as projects that improve market access for Canadian oil and gas start-up in 2024 and 2025, leading to promising years ahead,” says Waqar Syed, Energy Technology & Services and Head of Institutional Research. “We expect to see energy companies returning cash to shareholders, along with a focus on maintaining and prioritising a healthy balance sheet to allow for continued competitive growth opportunities and future M&A capital deployments.”

“Although we saw inflation cooling towards the end of 2023, energy companies will still need to balance increased capital costs and elevated labour base costs,” added Patrick O’Rourke, Managing Director, Institutional Research, Large-Cap E&P and Oilsands. “We’re seeing tailored adjustments based on learnings from 2023 to enhance performance in 2024.”

Diversified Industries Outlook 

Transportation: 2024 is expected to see improved business and leisure air travel with capacity at or slightly above 2019 levels. EVs may still face challenges until there’s a material move down the cost curve. In terms of the auto industry overall, it’s anticipated the market will remain healthy through 2025, until stocking levels normalize. ATB is neutral on rail and expects volume trends to remain under moderate pressure in early 2024 for Class 1 rails.

Engineering and Construction: Record demand and positive outlooks for earning growth are on the horizon for 2024. ATB sees several opportunities for investors, with the choice of stocks reflecting a company’s ability to provide capital-efficient growth in cash flows and earnings to remain significant this year.

“As we step into 2024, companies in our diversified portfolio are reporting robust demand and positive earnings growth forecasts, though consumer-facing companies are cautiously navigating the uncertain economic climate,” says Chris Murray, Managing Director, Institutional Research, Diversified Industries. “2024 presents significant investment opportunities in our coverage universe, with some stocks set to build on their market dominance and others poised for value discovery as strong, underappreciated growth prospects.”