Scotia Backs CNQ: Why Analysts Are Bullish on Canadian Natural Resources
Scotiabank’s upgrade of Canadian Natural Resources signals a rebound for the energy giant as analysts highlight a lucrative entry point for investors.
Editorial Team (ET)May 8, 2025
Shares of Canadian Natural Resources (CNQ) have faced headwinds over the past year, weighed down by concerns over U.S. tariffs and weaker oil prices. However, Scotiabank Global Equity Research has given investors a reason to reconsider their stance on the stock. Analyst Kevin Fisk upgraded CNQ from “sector perform” to “sector outperform,” signaling renewed confidence in the company’s long-term prospects.
This endorsement follows a period of underperformance relative to both international and domestic competitors, including Suncor Energy and Imperial Oil. CNQ’s struggles have been amplified by the uncertainty surrounding trade disputes and fluctuating oil markets, but analysts now see the pullback as an opportunity rather than a red flag.
Tariffs and Market Uncertainty Create a Buying Window
The trade tensions between Canada and the U.S. have cast a shadow over the Canadian energy sector. Since the announcement of tariffs, CNQ’s stock has lagged behind its peers by roughly 8 percent. Over the past 12 months, its share price has dropped by 15 percent, despite only a three percent decline in cash flow per share estimates. This discrepancy, according to Fisk, is an overreaction by the market.
With tariffs already postponed twice and the proposed levy on Canadian energy reduced from 25 percent to 10 percent, analysts believe the dispute is on track for a resolution. Fisk argues that if the trade conflict is settled, CNQ is poised to outperform, making its current price levels an attractive entry point for investors.
Strength in Fundamentals and Shareholder Returns
One of the biggest factors supporting a bullish case for CNQ is its ability to generate shareholder returns. The company has maintained a disciplined approach to capital allocation, prioritizing both stock buybacks and dividends. Once CNQ meets its debt target of $15 billion—expected by late 2026 if oil stays around $70 per barrel—the company plans to increase stock buybacks from 60 percent to 70 percent of free cash flow.
With a dividend yield of 5.5 percent, CNQ offers significantly higher returns to income-focused investors compared to the 3.6 percent average yield among its peers. RBC analyst Greg Pardy has also reiterated his optimism, calling CNQ “the most compelling buying opportunity among Canadian major energy companies.” He cited strong leadership, operational efficiency, and the company’s ability to generate free cash flow as key reasons for his bullish stance.
A Rebound in the Making?
Despite recent struggles, CNQ remains a dominant player in the oil sands sector. With a well-established asset base and a management team focused on disciplined financial execution, the company is positioned to capitalize on improving market conditions. Analysts see the current stock price as an opportunity for long-term investors willing to ride out short-term volatility.
If oil prices recover and the tariff situation stabilizes, CNQ could see substantial upside. Investors looking for a strong dividend yield, consistent cash flow, and a chance to buy a top-tier energy stock at a discount may find CNQ hard to ignore.
