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Here's Why Hold Strategy is Apt for Enbridge (ENB) Stock Now
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Enbridge Inc. (ENB - Free Report) has witnessed upward estimate revisions for 2023 and 2024 earnings in the past 30 days.
The Zacks Consensus Estimate for Enbridge’s 2023 and 2024 earnings per share is pegged at $2.20 and $2.11, respectively.
Factors Favoring the Stock
Enbridge has an extensive network of pipeline assets responsible for transporting 30% of North America crude oil production. Most of its earnings are generated from transportation operations, driven by a string of long-term contracts. The substantial contract base will likely provide the company with stable cash flows.
The midstream properties are also responsible for carrying as much as 20% of the natural gas Americans consume. Through its Gas Distribution and Storage operations, Enbridge has delivered roughly 2 trillion cubic feet of natural gas, serving 75% of Ontario residents.
With a significant portion of its assets being contracted by shippers for the long term, ENB’s business model is less exposed to volatility in oil and gas prices. Backed by long-term contracts, Enbridge’s business model has considerably lower volume risk exposure.
ENB has estimated C$19 billion in secured growth capital projects. Hence, the company is ensuring more cashflows in the coming years. The midstream operator is expected to generate $8.9 billion in free cash flow this year.
For 2023, Enbridge reiterated its EBITDA guidance of C$15.9-C$16.5 billion. The metric indicates an increase from the C$12 billion reported in 2022. The company has a favorable medium-term outlook as it expects to increase EBITDA by 5% per year through 2025.
Enbridge has a strong commitment toward returning capital to shareholders. It has mostly been yielding higher dividends than the composite stocks belonging to the industry. The Zacks Rank #3 (Hold) company offers a reliable 7.4% dividend yield, with 28 consecutive years of dividend hikes.
Risks
Compared to composite stocks belonging to the industry, Enbridge’s balance sheet has more debt exposure. Moreover, the leading midstream energy player’s bottom line is affected by increasing gas distribution costs.
Crestwood Equity Partners LP projects an adjusted EBITDA of $780-$860 million for this year.
In the past three months, Crestwood’s shares have risen 5.8%. The Zacks Consensus Estimate for CEQP’s 2023 and 2024 earnings per share is pegged at $1.56 and $1.96, respectively.
Murphy USA (MUSA - Free Report) is valued at $6.8 billion. In the past three months, its shares have risen 12.7%.
The Zacks Consensus Estimate for Murphy USA’s 2023 and 2024 earnings per share is pegged at $20.98 and $20.39, respectively.
Evolution Petroleum (EPM - Free Report) is worth $320 million. In the past three months, its shares have risen 29.6%.
The Zacks Consensus Estimate for EPM’s 2023 and 2024 earnings per share is pegged at $1.11 and $1.08, respectively.
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Here's Why Hold Strategy is Apt for Enbridge (ENB) Stock Now
Enbridge Inc. (ENB - Free Report) has witnessed upward estimate revisions for 2023 and 2024 earnings in the past 30 days.
The Zacks Consensus Estimate for Enbridge’s 2023 and 2024 earnings per share is pegged at $2.20 and $2.11, respectively.
Factors Favoring the Stock
Enbridge has an extensive network of pipeline assets responsible for transporting 30% of North America crude oil production. Most of its earnings are generated from transportation operations, driven by a string of long-term contracts. The substantial contract base will likely provide the company with stable cash flows.
The midstream properties are also responsible for carrying as much as 20% of the natural gas Americans consume. Through its Gas Distribution and Storage operations, Enbridge has delivered roughly 2 trillion cubic feet of natural gas, serving 75% of Ontario residents.
With a significant portion of its assets being contracted by shippers for the long term, ENB’s business model is less exposed to volatility in oil and gas prices. Backed by long-term contracts, Enbridge’s business model has considerably lower volume risk exposure.
ENB has estimated C$19 billion in secured growth capital projects. Hence, the company is ensuring more cashflows in the coming years. The midstream operator is expected to generate $8.9 billion in free cash flow this year.
For 2023, Enbridge reiterated its EBITDA guidance of C$15.9-C$16.5 billion. The metric indicates an increase from the C$12 billion reported in 2022. The company has a favorable medium-term outlook as it expects to increase EBITDA by 5% per year through 2025.
Enbridge has a strong commitment toward returning capital to shareholders. It has mostly been yielding higher dividends than the composite stocks belonging to the industry. The Zacks Rank #3 (Hold) company offers a reliable 7.4% dividend yield, with 28 consecutive years of dividend hikes.
Risks
Compared to composite stocks belonging to the industry, Enbridge’s balance sheet has more debt exposure. Moreover, the leading midstream energy player’s bottom line is affected by increasing gas distribution costs.
Stocks to Consider
Investors interested in the energy sector might look at the following companies that presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Crestwood Equity Partners LP projects an adjusted EBITDA of $780-$860 million for this year.
In the past three months, Crestwood’s shares have risen 5.8%. The Zacks Consensus Estimate for CEQP’s 2023 and 2024 earnings per share is pegged at $1.56 and $1.96, respectively.
Murphy USA (MUSA - Free Report) is valued at $6.8 billion. In the past three months, its shares have risen 12.7%.
The Zacks Consensus Estimate for Murphy USA’s 2023 and 2024 earnings per share is pegged at $20.98 and $20.39, respectively.
Evolution Petroleum (EPM - Free Report) is worth $320 million. In the past three months, its shares have risen 29.6%.
The Zacks Consensus Estimate for EPM’s 2023 and 2024 earnings per share is pegged at $1.11 and $1.08, respectively.