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Growth & Income

Estimates have been rising for Enbridge Inc. (ENB - Snapshot Report) following the company's solid fourth quarter results. It is a Zacks #2 Rank (Buy).

Enbridge offers investors both strong earnings growth and solid income. Management believes that the company can achieve average annual EPS growth of 10% through 2015. On top of this, the company pays a dividend that yields a solid 2.9%.

Company Description

Enbridge Inc. operates one of the largest crude oil and liquids pipeline system in the world and is a leader in natural gas distribution.

It is headquartered in Calgary, Alberta, Canada and has a market cap of $29 billion.

Fourth Quarter Results

Adjusted earnings per share came in at 37 cents, a solid 16% increase over the same quarter in 2010. It was 2 cents shy of the Zacks Consensus Estimate, however.

Earnings growth was driven in large part by a 63% increase in adjusted earnings in the Sponsored Investments segment and a 32% increase in the Gas Pipelines, Processing and Energy Services division. Earnings in the Liquids Pipelines segment grew by 8% while Gas Distribution declined 15%.

Meanwhile, operating cash flow increased 21% year-over-year to $452 million.

Outlook

Despite the miss, analysts revised their estimates higher for both 2012 and 2013, sending the stock to a Zacks #2 Rank (Buy). As you can see below, consensus estimates have been rising steadily over the last several months:

ENB: Enbridge Inc.

The Zacks Consensus Estimate for 2012 is now $1.65, representing 26% growth over 2011, and within management's guidance of $1.58-$1.74. The 2013 consensus estimate is currently $1.89, corresponding with 14% EPS growth.

In the Q4 press release, CEO Patrick Daniel stated that the company remains confident that it "can achieve an average annual growth rate in adjusted earnings per share of 10% through 2015, based on conservative assumptions for mainline throughput and future growth investment."

Dividend

In addition to strong earnings growth, the company pays a dividend that yields a solid 2.9%. Enbridge increased its payout by 15% in December and has raised its dividend by an average of 13% per year over the last five years.

Valuation

Shares of ENB trade at 23x forward earnings, a premium to the industry median of 20x, but certainly not unreasonable given the company's above-average growth rate.

The Bottom Line

With rising earnings estimates, strong earnings growth, a solid 2.9% dividend yield and reasonable valuation, Enbridge offers investors a lot to like.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.

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