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Pre Q2 Earnings: How Should You Play Enbridge (ENB) Stock?
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Enbridge Inc. (ENB - Free Report) is set to report second-quarter 2024 results on Aug 2, 2024, before the opening bell.
The Zacks Consensus Estimate for second-quarter earnings is pegged at 46 cents per share, implying a decline of almost 10% from the year-ago reported number. The estimate was revised downward by two analysts in the past 30 days against one upward movement. The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $4.3 billion, suggesting an almost 45% decline from the year-ago reported number.
Image Source: Zacks Investment Research
ENB beat the consensus estimate for earnings in two of the trailing four quarters, missed once and matched the same on the remaining occasion, with the average surprise being 4.1%. This is depicted in the graph below:
Our proven model doesn’t predict an earnings beat for ENB this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping Q2 Results
Enbridge's business model is stable, as most of its midstream assets are contracted by shippers for the long term. Consequently, the stock is not significantly impacted by volume fluctuations or commodity price volatility, which is likely to have led to stable fee-based revenues in the second quarter.
The extensive network of midstream assets, which is expected to have aided the company with fee-based cash flows, include Liquids Pipelines, Gas Transmission & Midstream and Gas Distribution & Storage.
Price Performance & Valuation
ENB's stock has soared 10.4% over the past year compared with the industry’s rise of 24.2%. Enterprise Products Partners (EPD - Free Report) and Kinder Morgan, Inc. (KMI - Free Report) , two other big midstream energy companies, have jumped 17% and 29.9%, respectively, over the same time frame.
One-Year Price Chart
Image Source: Zacks Investment Research
With the price increase, ENB is appearing relatively overvalued. The company's current trailing 12-month enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio is 14.44, which is trading at a premium compared to the industry average of 12.99.
Image Source: Zacks Investment Research
Investment Thesis
The midstream energy giant is well-regarded for its low-risk business model, offering stable and predictable cash flows. This stability is largely due to long-term contracts that provide consistent fee-based revenues, thereby continuously generating wealth for shareholders. Enbridge enhances its cash flows with a robust pipeline of secured midstream projects worth C$25 billion, scheduled to come online through 2028. Over the past year, Enbridge has consistently provided investors with higher dividend yields compared to the industry average.
However, Enbridge's historical growth has been heavily dependent on debt financing, which becomes less accessible and more costly in a high-interest rate environment. This reliance on debt could create financial strain, potentially affecting the company's ability to invest in new projects and maintain its current dividend policy.
Last Word
Considering the above factors, it would be prudent for investors to wait for a better entry point for the stock, which is currently relatively overvalued.
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Pre Q2 Earnings: How Should You Play Enbridge (ENB) Stock?
Enbridge Inc. (ENB - Free Report) is set to report second-quarter 2024 results on Aug 2, 2024, before the opening bell.
The Zacks Consensus Estimate for second-quarter earnings is pegged at 46 cents per share, implying a decline of almost 10% from the year-ago reported number. The estimate was revised downward by two analysts in the past 30 days against one upward movement. The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $4.3 billion, suggesting an almost 45% decline from the year-ago reported number.
ENB beat the consensus estimate for earnings in two of the trailing four quarters, missed once and matched the same on the remaining occasion, with the average surprise being 4.1%. This is depicted in the graph below:
Enbridge Inc Price and EPS Surprise
Enbridge Inc price-eps-surprise | Enbridge Inc Quote
Q2 Earnings Whispers
Our proven model doesn’t predict an earnings beat for ENB this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is not the case here.
The leading midstream energy player has an Earnings ESP of -0.31%. ENB currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping Q2 Results
Enbridge's business model is stable, as most of its midstream assets are contracted by shippers for the long term. Consequently, the stock is not significantly impacted by volume fluctuations or commodity price volatility, which is likely to have led to stable fee-based revenues in the second quarter.
The extensive network of midstream assets, which is expected to have aided the company with fee-based cash flows, include Liquids Pipelines, Gas Transmission & Midstream and Gas Distribution & Storage.
Price Performance & Valuation
ENB's stock has soared 10.4% over the past year compared with the industry’s rise of 24.2%. Enterprise Products Partners (EPD - Free Report) and Kinder Morgan, Inc. (KMI - Free Report) , two other big midstream energy companies, have jumped 17% and 29.9%, respectively, over the same time frame.
One-Year Price Chart
With the price increase, ENB is appearing relatively overvalued. The company's current trailing 12-month enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio is 14.44, which is trading at a premium compared to the industry average of 12.99.
Investment Thesis
The midstream energy giant is well-regarded for its low-risk business model, offering stable and predictable cash flows. This stability is largely due to long-term contracts that provide consistent fee-based revenues, thereby continuously generating wealth for shareholders. Enbridge enhances its cash flows with a robust pipeline of secured midstream projects worth C$25 billion, scheduled to come online through 2028. Over the past year, Enbridge has consistently provided investors with higher dividend yields compared to the industry average.
However, Enbridge's historical growth has been heavily dependent on debt financing, which becomes less accessible and more costly in a high-interest rate environment. This reliance on debt could create financial strain, potentially affecting the company's ability to invest in new projects and maintain its current dividend policy.
Last Word
Considering the above factors, it would be prudent for investors to wait for a better entry point for the stock, which is currently relatively overvalued.