oil and gas

AGT FOOD & INGREDIENTS INC., $31.53, symbol AGT on Toronto, buys and processes a range of pulses, which include peas, beans, lentils and chickpeas, as well as other specialty crops. The Saskatchewan-based company owns processing plants in Canada, the U.S., Turkey, Australia, China and South Africa.

Before one-time items, AGT earned $0.51 a share in the three months ended September 30, 2015, up 10.9% from $0.46 a year earlier. Revenue gained 26.1%, to $362.8 million from $287.7 million. The increases came from recent acquisitions and higher processing activity.

AGT continues to benefit from its plan to focus on more-profitable products, such as ingredients and packaged foods, as opposed to simply cleaning, splitting and bagging bulk crops. Food makers use these ingredients in products such as baked goods, soups and beverages, as well as pet food and animal feed.

The stock trades at a low 13.2 times the $2.38 a share AGT will probably earn in 2016. It yields 1.9%.

OUR RECOMMENDATION: AGT Food & Ingredients is a buy.

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MOLSON COORS CANADA INC., Toronto symbols TPX.A $118.50 and TPX.B $124.50, has agreed to buy the 58% of the MillerCoors joint venture it doesn’t own.

MillerCoors was formed in 2008, when Molson Coors and SABMiller merged their U.S. brewing operations. Each company has a 50% voting interest in MillerCoors, but SABMiller gets 58% of the profits, while Molson Coors gets 42%.

This week, SABMiller agreed to merge with rival Anheuser-Busch InBev to form the world’s largest brewer. Competition regulators will likely require the new firm to sell certain operations, including its MillerCoors stake.

Molson Coors will pay $12 billion for SABMiller’s interest (all amounts except share price in U.S. dollars). The deal also includes Miller’s brands outside the U.S.

This a big purchase for Molson Coors, which has a $17.0-billion market cap (or the value of all outstanding shares).

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The new Liberal government in Ottawa plans to spend more on roads, bridges and public transit over the next three years. SNC-Lavalin, below, is already working on big public works projects, including a transit line in Toronto and a bridge in Montreal, so it should gain from this new spending. The Liberals are also in favour of certain new pipelines, which should help ShawCor (see next article). SNC-LAVALIN GROUP INC. $42 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 149.8 million; Market cap: $6.3 billion; Price-to-sales ratio: 0.6; Dividend yield: 2.4%; TSINetwork Rating: Average; www.snclavalin.com) is narrowing its focus to engineering projects in the oil and gas, mining and water-treatment industries....

SHAWCOR LTD. $28 (Toronto symbol SCL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 64.5 million; Market cap: $1.8 billion; Price-to-sales ratio: 1.0; Dividend yield: 2.1%; TSINetwork Rating: Average; www.shawcor.com) makes sealants and coatings that keep oil and gas pipelines from rusting. It also manufactures industrial products, such as electrical wire and protective sheaths. In the three months ended September 30, 2015, ShawCor’s revenue rose 3.4%, to $485.4 million from $469.6 million a year earlier. Favourable exchange rates added $42.5 million to its revenue in the latest quarter. Earnings gained 21.3%, to $38.1 million from $31.4 million. Per-share profits rose 15.7%, to $0.59 from $0.51, on fewer shares outstanding. As of September 30, 2015, ShawCor’s backlog was $556 million. Its strong reputation should keep helping it win contracts; it has a total of $600 million worth of bids underway on new jobs....

BANK OF MONTREAL $77 (Toronto symbol BMO; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 642.5 million; Market cap: $49.5 billion; Price-to-sales ratio: 2.9; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.bmo.com) is Canada’s fourth-largest bank, with $672.4 billion of assets. The bank has steadily expanded beyond Canada in recent years. For example, in 2011, it acquired Wisconsin-based banking firm Marshall & Ilsley for $4.0 billion in stock. That more than doubled the number of branches Bank of Montreal operates in the U.S. and added two million customers. In 2014, it paid $1.3 billion for U.K.-based wealth management firm F&C Asset Management, which sells investment services to individuals and institutional clients, such as pension plans and insurance companies....

Imperial Oil continues to face low oil prices, but its diversified operations make it our top energy stock for conservative investors.

With an improving U.S. economy, cost-cutting and smart growth, we view Wells Fargo as a lower-risk value stock for conservative investors.

RUSSEL METALS INC., $19.26, symbol RUS on Toronto, is one of North America’s largest metal distributors, serving 39,000 clients at 53 locations in Canada and 12 in the U.S. In the three months ended September 30, 2015, Russel’s revenue fell 25.5%, to $773.4 million from $1.04 billion a year earlier. The company’s sales mainly declined because revenue fell 40% at its energy products division, which supplies pipes for oil and gas drillers. Earnings dropped sharply, to $12.8 million, or $0.21 a share, from $33.0 million, or $0.54. The latest figure included a $2-million charge related to a more than 7% cut to the company’s workforce. Russel’s earnings fell faster than its revenue because steel prices moved down in the latest quarter. That hurts the company’s profit margins and causes it to suffer losses on its inventory....

Pennsylvania-based Vanguard Group is one of the world’s largest investment management companies. In all, it administers almost $3 trillion U.S. in 170 mutual funds. Vanguard, which went into business in 1975, offers low-fee index mutual funds. Generally speaking, Canadians can’t buy units of mutual funds that are registered in the U.S., because they aren’t registered with provincial securities commissions. For that matter, some Canadian funds aren’t available in all provinces. Canadians can, however, buy Vanguard exchange traded funds that trade on stock exchanges. We don’t recommend all of Vanguard’s ETFs, but here are two we do see as low-fee buys....

IMPERIAL OIL $44.63 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $37.8 billion; TSINetwork Rating: Average; Dividend yield: 1.3%; www.imperialoil.ca) is a major integrated oil company with oil sands projects in Alberta and conventional oil and gas operations across Western Canada. It also operates three refineries and 1,700 Esso gas stations. Imperial recently finished the second phase of its 71%-owned Kearl oil sands project in northern Alberta. In the three months ended September 30, 2015, Imperial’s share of Kearl’s output was 192,000 barrels a day. That helped push its overall production up 25.7%, to 386,000 barrels of oil equivalent a day from 307,000 a year earlier. However, lower oil prices cut its revenue by 25.9%, to $7.2 billion from $9.7 billion. Cash flow per share fell 32.9%, to $1.10 from $1.64. Imperial plans to keep expanding Kearl and Cold Lake, its two main oil sands properties. These projects will prosper when oil prices recover, and they should last for decades. Meanwhile, the company’s refineries cut its exposure to falling oil prices, as cheaper crude cuts the refineries’ input costs and increases their profit margins....