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Here's Why Hold Strategy is Apt for Enbridge Stock Now

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Enbridge Inc. (ENB - Free Report) has witnessed upward earnings estimate revisions for 2024 and 2025, respectively, in the past 30 days.

Factors Favoring ENB Stock

Currently carrying a Zacks Rank #3 (Hold), Enbridge is among the leading midstream energy players in North America. Its energy infrastructure includes one of the world’s longest crude oil pipeline networks. You can see the complete list of today’s Zacks #1 Rank stocks here.     

With a significant portion of its assets being contracted by shippers for the long term, its business model is less exposed to volatility in oil and gas prices. Backed by long-term contracts, Enbridge’s business model has considerably lower volume risk exposure.

ENB has secured billions in growth capital projects, slated for completion in the coming years. This initiative is expected to bolster the company's cashflows in the years ahead.

The midstream company is strongly dedicated to consistently returning capital to shareholders, a commitment supported by decades of annual dividend increases.

Risks to ENB’s Business

Compared to composite stocks belonging to the industry, Enbridge’s balance sheet has more debt exposure. Moreover, there has been a slowdown in drilling activities, as upstream players mainly focus on stockholder returns rather than boosting output. This could affect demand for midstream assets. Other midstream players that might also be affected include The Williams Companies Inc. (WMB - Free Report) , Enterprise Products Partners LP (EPD - Free Report) , and Kinder Morgan, Inc. (KMI - Free Report) .

Having ownership and operating interests in pipeline networks spanning 33,000 miles, The Williams Companies transports natural gas from the prolific basins in the United States to the end market.

Enterprise Products, a top-tier North American midstream service provider, boasts a vast and diversified asset portfolio. This includes more than 50,000 miles of pipelines and a storage capacity of 300 million barrels.

Being a leading midstream service provider, Kinder Morgan’s pipeline and storage assets are secured under long-term take-or-pay contracts. These contracts ensure that shippers pay for the capacity reserved, whether they utilize it or not, which provides a steady stream of revenue. This structure allows Kinder Morgan to generate stable earnings insulated from fluctuations in the volume of natural gas transported, offering significant stability to its bottom line.


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