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Why Is Enbridge (ENB) Down 26.4% Since Last Earnings Report?

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It has been about a month since the last earnings report for Enbridge (ENB - Free Report) . Shares have lost about 26.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Enbridge due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Enbridge Misses Earnings & Revenue Estimates in Q4

Enbridge reported fourth-quarter 2019 earnings per share of 46 cents, missing the Zacks Consensus Estimate of 50 cents and declining from the year-ago quarter’s profit of 49 cents. The underperformances were owing to lower contributions from Mainline System. This was partly compensated by higher distributed natural gas volumes.

Total revenues in the quarter increased 7% year over year to $9,359 million. However, the top line missed the Zacks Consensus Estimate of $9,528 million.

Distributable Cash Flow (DCF) & Dividend

In fourth-quarter 2019, the company reported DCF of C$2,051 million compared with C$1,863 million a year ago.

The company hiked the quarterly dividend by 9.8% to 81 Canadian cents per share. The raised dividend will likely be payable on Mar 1 to shareholders of record as on Feb 14.

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) amounted to C$1,720 million, down from C$1,728 million in the year-earlier quarter. Lower contributions from the Mainline System primarily led to the underperformance.

Gas Transmission and Midstream: The segment’s adjusted EBITDA totaled C$948 million, down from C$952 million in fourth-quarter 2018. Lower contributions from the Canadian gas transmission business caused the downside.

Gas Distribution and Storage: The unit generated adjusted profit of C$481 million compared with C$452 million in the prior-year quarter. A rise in distributed natural gas volume drove the outperformance.

Renewable Power Generation: The segment recorded adjusted earnings of C$119 million, up from C$98 million in the prior-year quarter. Hohe See Offshore Wind Project primarily contributed to the outperformance.

Energy Services: The segment generated adjusted loss of C$22 million against a profit of C$73 million in fourth-quarter 2018.

Balance Sheet

At the end of fourth-quarter 2019, the company reported total debt of C$64,963 million, and cash and cash equivalents of C$648 million.  Its debt-to-capitalization ratio was 49.6%.

Guidance

For 2020, the company has reaffirmed its guidance for DCF per share at the band of C$4.50 to C$4.80. Enbridge also projects EBITDA for 2020 at C$13.7 billion.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

At this time, Enbridge has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Enbridge has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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