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Here's Why You Should Hold Enbridge (ENB) in Your Portfolio

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Zacks Equity Research
·3 min read
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Enbridge Inc. ENB has witnessed upward estimate revisions for 2021 and 2022 earnings in the past 60 days. In fact, four out of six analysts have revised earnings estimates upward for 2021 and 2022, respectively. Also, despite coronavirus-induced uncertainties, this leading midstream energy player’s stock price has improved 3.2% in the past three months, outperforming the sector’s 0.8% growth.

Factors Working in Favor

The company, currently carrying a Zacks Rank #3 (Hold), has an extensive network of pipeline assets that are responsible for transporting roughly 25% of North American crude oil production. The midstream properties are also responsible for carrying as much as 25% of natural gas that are consumed by Americans. In Ontario and Quebec, the company is dedicatedly serving 3.8 million retail customers through its Gas Distribution and Storage operations.

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

The company has estimated roughly $10-billion growth capital projects to be placed into service in 2021. Moreover, from 2021 to 2023, the midstream player expects $17 billion in growth capital projects to be executed. Notably, the company expects the project executions to drive 4% to 5% distributable cash flow per share growth through 2023.

Risks

It is to be noted that although Enbridge’s long-term business fundamentals look good, the declining production of commodities owing to coronavirus-dented energy demand is likely to hurt short-term demand for the company’s midstream assets.

Also, as compared to the broader energy sector, the company’s balance sheet has significant higher exposure to debt capital. Moreover, over the past year, Enbridge has mostly been yielding lower dividend than the industry.

Stocks to Consider

Meanwhile, a few better-ranked players in the energy sector include Devon Energy Corporation (DVN), Diamondback Energy, Inc. (FANG) and EOG Resources, Inc. (EOG). All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Devon witnessed upward earnings estimate revisions for 2021.

Diamondback is likely to see earnings growth of 112.5% in 2021.

EOG Resources is expected to see earnings growth of 272.6% in 2021.

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Enbridge Inc (ENB) : Free Stock Analysis Report

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