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Is a Beat in the Offing for Enbridge's (ENB) Q2 Earnings?

Zacks Equity Research

Enbridge Inc. ENB is set to report second-quarter 2020 results on Jul 29, before the opening bell.

In the last reported quarter, the company came up with earnings of 62 cents per share that beat the Zacks Consensus Estimate of 51 cents owing to higher contribution from the Mainline System. This was partly offset by lower contribution from the gas distribution & storage business.

In the last four quarters, Enbridge beat earnings estimates twice, met once and missed on another occasion, with the average surprise being 8.2%, as shown in the chart below.

Enbridge Inc Price and EPS Surprise

Enbridge Inc Price and EPS Surprise
Enbridge Inc Price and EPS Surprise

Enbridge Inc price-eps-surprise | Enbridge Inc Quote

Let’s see how things have shaped up prior to the earnings announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for second-quarter earnings of 41 cents has seen four upward revisions and one downward movement in the past 30 days. The figure suggests a year-over-year decline of 18%.

Further, the Zacks Consensus Estimate for revenues is pegged at $8.5 billion, indicating a decline of 13.9% from the year-ago reported figure.

What the Quantitative Model Suggests

Our proven model predicts an earnings beat for Enbridge 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.

Earnings ESP: Enbridge has an Earnings ESP of +0.78%. This is because the Most Accurate Estimate for the quarter is currently pegged at 42 cents, higher than the Zacks Consensus Estimate of 41 cents per share. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Enbridge currently carries a Zacks Rank #3.

Factors Driving the Better-Than-Expected Earnings

Enbridge has operating interests in a huge network of liquid pipelines, with a capacity of transporting almost 25% of the total crude oil produced in North America. The midstream energy player is likely to have generated stable fee-based revenues from the pipeline network, which is under long-term contracts by shippers.

The company is also expected to have generated fee-based revenues from midstream assets by transporting roughly 20% of natural gas consumed in the United States.

Overall, Enbridge’s business model is less exposed to commodity price volatility and is mostly backed by long-term contracts. This is likely to have contributed to its second-quarter performance. However, the positives might have been partially offset by the effect of the pandemic, which has been denting global energy demand. The company expects overall throughput to reduce by an average of 400,000-600,000 barrels per day in the June quarter of 2020.

Other Stocks That Warrant a Look

Here are some other companies from the Energy space that you may also want to consider, as our model shows that these too have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

Canadian Natural Resources Limited CNQ has an Earnings ESP of +6.48% and is a Zacks #2 Ranked player. The company is scheduled to release second-quarter results on Aug 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

Range Resources Corporation RRC has an Earnings ESP of +7.91% and a Zacks Rank of 3. It is scheduled to report second-quarter results on Aug 3.

EOG Resources, Inc. EOG has an Earnings ESP of +5.27% and holds a Zacks Rank #2. It is set to report second-quarter results on Aug 6.

Zacks Top 10 Stocks for 2020

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EOG Resources, Inc. (EOG) : Free Stock Analysis Report
 
Enbridge Inc (ENB) : Free Stock Analysis Report
 
Range Resources Corporation (RRC) : Free Stock Analysis Report
 
Canadian Natural Resources Limited (CNQ) : Free Stock Analysis Report
 
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