On Nov 22, Enbridge Energy Partners, L.P. EEP was downgraded to a Zacks Rank #5 (Strong Sell).
Over the last 30 days, the Zacks Consensus Estimate for fourth-quarter 2017 earnings has been revised down from 25 cents to 20 cents. Moreover, for 2017, the Zacks Consensus Estimate was revised downward from earnings of 77 cents to 72 cents over the same time period.
We are concerned about the huge debt burden as reflected by the partnership’s long-term debt of $6,291 million, as of Sep 30, 2017, which is significantly higher than $4,777 million as of Dec 31, 2013. On top of that, current debt of $400 million, as of Sep 30, 2017, escalated from no short-term debt, as of Dec 31, 2016.
Also, cash balances have also reduced drastically. From $295 million as of Dec 31, 2014, cash balance slipped to $28 million, as of Sep 30, 2017. Hence, the rise in debt burden and decline in cash balance reflect the weakness in the partnership’s balance sheet.
On top of that, Enbridge Energy has not been able to generate healthy net operating cash flow. The trailing twelve-month free cash flow of $843 million, as of Sep 30, 2017, is way below $1,416 million reported as of Dec 31, 2016.
The third-quarter 2017 results of Enbridge Energy are not impressive. The partnership reported adjusted earnings of 24 cents per unit, which missed the Zacks Consensus Estimate by a penny. Also, total revenues were $616 million, down from the year-ago level of $1,120.6 million.
Enbridge Energy’s pricing performance fails to impress as well. Year to date, the partnership has lost 48.4%, underperforming the industry’s 22.8% decline.
Stocks to Consider
A few better-ranked players in the energy space are China Petroleum & Chemical Corporation SNP, Northern Oil and Gas, Inc. NOG and ExxonMobil Corporation XOM. China Petroleum and Northern Oil sport a Zacks Rank #1 (Strong Buy), while ExxonMobil carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Headquartered in Beijing, China Petroleum is a leading integrated energy player. The company will likely witness year-over-year earnings growth of 59.1% in 2017.
Based in Minnetonka, MN, Northern Oil is an upstream energy player. The company’s 2017 revenues are estimated to grow almost 44%.
Headquartered in Irving, TX, ExxonMobil is the largest publicly traded energy firm. The company managed to beat the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 8.81%.
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