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Enbridge (ENB) Slips 2.1% Since Q3 Earnings Beat Estimates

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  • ENB
  • MPLX
  • KMI

Enbridge Inc. ENB has declined 2.1% since reporting strong third-quarter 2021 earnings on Nov 5. Although increased contributions from Mainline System, Regional Oil Sands System, Gulf Coast and Mid-Continent System are aiding the bottom line, the company’s challenging Energy Services business is clouding the outlook.

Enbridge reported third-quarter 2021 adjusted earnings per share of 47 cents, beating the Zacks Consensus Estimate by a penny and increasing from the year-ago figure of 36 cents.

Total revenues increased 33.2% year over year to $9,107 million.

Enbridge Inc Price, Consensus and EPS Surprise

Enbridge Inc Price, Consensus and EPS Surprise
Enbridge Inc Price, Consensus and EPS Surprise

Enbridge Inc price-consensus-eps-surprise-chart | Enbridge Inc Quote

Segment Analysis

Enbridge conducts business through five segments — Liquids Pipelines, Gas Transmission and Midstream, Gas Distribution and Storage, Renewable Power Generation, and Energy Services.

Liquids Pipelines: The segment’s adjusted earnings before interest, income taxes, and depreciation and amortization (EBITDA) totaled C$1,898 million, up from C$1,732 million in the year-earlier quarter. Higher contributions from Mainline System, Regional Oil Sands System, Gulf Coast and Mid-Continent System primarily aided the segment.

Gas Transmission and Midstream: The segment’s adjusted earnings totaled C$986 million, up from C$945 million in third-quarter 2020. Higher contributions from the U.S. Gas Transmission business’ Atlantic Bridge Phase III project aided the segment’s performance.

Gas Distribution and Storage: The unit generated a profit of C$296 million, down from C$315 million in the prior-year quarter due to the timing of operating expenditures, partially offset by higher distribution charges.

Renewable Power Generation: The segment recorded earnings of C$89 million, down from C$93 million in the prior-year quarter as the energy giant witnessed weak wind resources from wind power generation facilities in Canada.

Energy Services: The segment incurred a loss of C$116 million, widening from a loss of C$110 million in third-quarter 2020. Certain markets experienced a considerable compression in location and quality differentials, thereby hurting the segment.

Distributable Cash Flow (DCF)

For third-quarter 2021, Enbridge reported DCF of C$2,290 million, representing an increase from C$2,088 million a year ago. It currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Balance Sheet

At the end of third-quarter 2021, the company reported long-term debt of C$65,036 million, up sequentially from C$63,090 million. It had cash and cash equivalents of C$451 million. The current portion of long-term debt was C$4,693 million. Enbridge’s long-term debt to capitalization was 50.1% at third quarter-end.

Guidance

For 2021, the company reaffirmed its guidance for DCF per share in the band of C$4.70-C$5. It continues to project 2021 EBITDA within C$13.9-C$14.3 billion. The company is still expected to bring more than $10 billion of capital online this year.

Final Words

The improving energy demand scenario is driving all the companies higher. Energy infrastructure companies like Enbridge, MPLX LP MPLX, Kinder Morgan, Inc. KMI, Antero Midstream Corporation AM and others are expected to ride on the demand recovery with their strategically placed assets. Their third-quarter earnings reflect the same.

Similar to Enbridge, MPLX witnessed major improvements in third-quarter bottom line, thanks to increased contributions from logistics and storage operations as well as the gathering and processing business. Increased pipeline throughputs and natural gas liquids prices buoyed its third-quarter results.

For 2021, MPLX expects total capital spending of $650 million, lower than the previously mentioned $800 million due to increased efficiency. It expects to continue generating excess free cash flow, which will enhance financial flexibility, including the ability to return incremental capital to unitholders.

The rebound in fuel demand is attributing to year-over-year higher earnings and strong revenues for companies like Kinder Morgan. The company continues to project DCF and adjusted EBITDA for this year at $5.4 billion and $7.9 billion, respectively. The firm anticipates 2021 net income at $1.7 billion.

Kinder Morgan’s third-quarter DCF was $1,013 million. For this year, the company expects to announce a dividend payout of $1.08 per share, indicating a year-over-year increase of 3% that signals its growing operational strength.

Based in Denver, CO, Antero Midstream generates stable fee-based revenues under long-term contracts for providing customized and integrated midstream services to clients. It reported third-quarter adjusted earnings per share of 22 cents, beating the Zacks Consensus Estimate of 20 cents due to higher gross joint venture processing volumes.

For 2021, Antero Midstream maintains its capital guidance at $240-$260 million. The company has an organic project backlog of $1.05-$1.15 billion for 2021-2025. Antero Midstream is well positioned to deliver peer-leading free cash flow, with a declining leverage profile in 2021. The company expects to generate more than $6 billion of free cash flow between 2021 and 2025.


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