Barlow’s Research Roundup: Scotia analyst’s top picks, earning preview for yield-heavy energy infrastructure sector

Scotiabank said Q1/26 infrastructure results were ahead of expectations, with 2026/2027 estimates revised higher and higher energy pricing seen as a tailwind for pipelines and midstream. RBC highlighted beneficiaries of Canada’s National Electricity Strategy, including names with heavy Canadian infrastructure exposure and power/electricity ties, especially those serving grid expansion and AI data center demand. Separately, BofA’s fund manager survey showed cash levels fell to 3.9% and sentiment toward risk assets improved, though investors are increasingly crowded into semis and other risk-on trades.

Analysis

The near-term setup favors the Canadian engineering, consulting, and rental complex because the market is still underestimating how quickly project pipelines can convert from policy intent into backlog. The National Electricity Strategy effectively turns power-demand growth into a multi-decade capex supercycle, but the first tradable winners are the firms with the shortest quote-to-cash cycle: rental/distribution channels and multi-discipline consultants that can monetize pre-construction spend before large EPC awards hit. URI is the cleanest liquid proxy for incremental site activity; STN and TTEK have the better operating leverage to planning, permitting, grid studies, and environmental work, which usually lead full-build revenue by 6-18 months.

The second-order effect is that this is not just an infrastructure story; it is a balance-sheet story for utilities and developers. Higher permitted returns, larger capex plans, and AI-related load growth should support a longer runway for equity issuance and project financing, but that also raises the bar for execution and cost control. The biggest risk is that the market extrapolates a 2050 demand chart into near-term backlog too aggressively, while actual rate cases, interconnection queues, and labor bottlenecks delay monetization; that gap can create multiple compression if rates stay elevated for another 2-3 quarters.

On positioning, the crowded side of the boat is still semis and broad risk-on, which makes infrastructure-adjacent cyclicals attractive as a relative-value hedge against a crowded AI trade. If long-duration yields keep drifting higher, high-multiple AI beneficiaries are vulnerable while names like STN and TTEK can still work because their growth is policy- and capex-driven rather than duration-dependent. The contrarian takeaway is that this is more of a selective rotation than a blanket beta trade: the best risk/reward is in names with Canadian revenue leverage and earnings revisions that can outpace consensus before the macro crowd recognizes the theme.

Key Decisions for Investors

• Go long URI on a 1-3 month horizon as the highest-beta, most liquid early-cycle beneficiary of rising utility and grid-related site activity; target a 10-15% upside if project announcements and rental utilization inflect, with a stop if higher rates visibly stall industrial capex.
• Add STN vs. short a semis basket or QQQ into strength over the next 4-8 weeks; the pair offers cleaner exposure to policy-driven infrastructure spend versus crowded AI leadership, with lower duration risk and better earnings visibility.
• Buy TTEK for 6-12 months as a delayed monetization play on permitting, environmental, and grid-adjacent consulting demand; this is a lower-volatility way to express the thesis, with upside from backlog conversion and limited downside unless public capex budgets are cut.
• If seeking relative value within infrastructure, prefer STN/TTEK over broad industrials: they should capture the first wave of planning spend before hard construction awards, giving a better risk/reward than pure contractors if the cycle slows.
• Use any further rally in semiconductors to hedge long infrastructure exposure rather than chase the AI trade; the positioning backdrop suggests semis are vulnerable to profit-taking while infrastructure names are still under-owned and under-earning.