Today's Must Read
Enbridge's (ENB) C$75B Project Backlog to Offset Debt Load
Public Storage (PSA) Gains From Buyouts, Supply Woes Remain
Tuesday, February 27, 2018
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Dominion (D), Enbridge (ENB) and Public Storage (PSA). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Dominion’s shares have declined -5.2% over the last three months, outperforming the Zacks Electric Power industry, which has lost -8.3% over the same period. Dominion’s fourth-quarter earnings and total revenues were better than expected.
The Zacks analyst thinks the recent merger deal with SCANA is going to be immediately accretive to earnings and boost performance of Dominion. Dominion Energy is benefiting from its regulated growth projects and synergies from Questar acquisition.
The company’s expansion of electric transmission, natural gas facilities, green power generation and midstream assets are strong positives. The company has raised its dividend rate and is in line with the company’s objective to increase annual dividend by 10% per year till to 2020, starting 4Q17.
However, Dominion Energy’s near-term prospects and earnings will be adversely impacted due to lower solar investment tax credit. Any delay in ongoing capital projects could adversely impact profitability of the company.
Shares of Enbridge have declined -18.9% over the last one year, significantly underperforming the Zacks Oil Pipeline industry’s loss of -8.5% during the same period. Enbridge has the longest and most sophisticated crude and liquids pipeline system in the world that spreads over 17,511 miles.
The Zacks analyst appreciates the merger with Spectra Energy as it has made Enbridge the largest energy infrastructure company in North America in terms of enterprise value. Also, the transaction has given Enbridge the industry’s largest backlog of growth projects, worth around C$75 billion. The company believes that this huge backlog will help it grow dividend by 10% annually through 2020.
During fourth-quarter 2017, Enbridge reported better-than-expected results. However, the company’s substantial debt load is a matter of concern. During 2017, long-term debt rose more than 70% while cash balance declined almost 73%, reflecting weak financials.
Public Storage’s shares have outperformed the Zacks REIT and Equity Trust industry over the past six months, losing -4.2% vs -7.8%. Also, the stock has seen the Zacks Consensus Estimate for 2018 funds from operations (FFO) per share being revised upward in two months’ time.
Recently, Public Storage reported better-than-expected fourth-quarter 2017 core FFO per share. Results mirrored an improvement in net operating income (NOI) from both same-store and non-same store facilities. Also, Public Storage benefited from its expansion efforts.
Admittedly, Public Storage is a recognized and established name in the self-storage industry in the United States. Further, a solid balance sheet has enabled the company to pay sustainable dividends. However, supply has been rising in a number of its markets. This limits its power to raise rents and turn on more discounting. Additionally, rate hike has added to its woes.
Other noteworthy reports we are featuring today include Hewlett Packard (HPE), Yum! Brands (YUM) and Hilton (HLT).
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Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>