On Apr 17, Zacks Investment Research downgraded Texas-based Enbridge Energy Partners LP (EEP) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Enbridge Energy witnessed sharp downward estimate revisions after reporting disappointing fourth-quarter 2012 results. In fact, this leading master limited partnership delivered negative earnings surprises in 3 of the last 4 quarters with an average miss of 17.75%.
On Feb 13, 2013, Enbridge Energy reported weak fourth-quarter 2012 results, reflecting lower natural gas liquids price realization. The partnership reported fourth-quarter 2012 adjusted earnings of 18 cents per unit, missing the Zacks Consensus Estimate of 26 cents. The quarterly figure also deteriorated 43.8% from the year-earlier profit of 32 cents.
With regard to business units, the Liquids segment’s operating income plunged 17.6% to $133.0 million in the quarter from the year-earlier level of $161.5 million. The Natural Gas segment’s operating income decreased 16.5% year over year to $42.9 million in the fourth quarter, due to lower revenues from lower natural gas and natural gas liquids prices. Additionally, the Marketing segment registered an operating loss of $1.4 million versus an operating loss of $1.2 million in the prior-year quarter.
Notably, Enbridge Energy’s distribution growth prospects are closely linked to the successful completion of organic growth projects, which in turn might be adversely affected by operational hindrance, cost inflations and overruns, as well as delays in completion.
A combination of all these factors has weighed on the earnings estimates for Enbridge Energy in the last 60 days. The Zacks Consensus Estimate for the first quarter of 2013 has gone down by 30.77% to 18 cents per unit while for 2013, the estimate dropped 18.18% to 99 cents per unit.
Enbridge Energy is expected to announce its first-quarter 2013 results on May 1. The Zacks Consensus Estimate for the to-be-reported quarter is a profit of 18 cents per unit on revenues of $1,745.0 million.
Other Stocks to Consider
Not all MLPs in the energy sector are performing as poorly as Enbridge Energy. The stocks of Delek Logistics Partners LP (DKL), NuStar Energy LP (NS) and Summit Midstream Partners LP (SMLP) are worth considering. All these stocks carry a Zacks Rank #2 (Buy).
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