We are upbeat about Enbridge Inc’s ENB prospects and believe it is a promising pick right now. Year to date, the leading midstream energy player in North America has rallied 7.4%, outperforming the 6.1% composite growth of the stocks belonging to the industry.
Currently, the stock carries a Zacks Rank #2 (Buy). Let’s take a look at the factors that make this midstream energy service provider an attractive bet.
Stable Fee-Based Revenues
Enbridge has diversified midstream infrastructures that have been connecting producers and consumers of oil, natural gas and liquids in North America. Importantly, the company is responsible for the transport of as much as 25% of North American crude, generating stable fee-based revenues. In fact, the company is expecting almost 50% of its 2019 EBITDA to come from its liquid pipelines.
Moreover, the company’s large pipeline networks connect consumers with the key producing basins of natural gas. From the gas transmission operations, Enbridge expects to generate 30% of its projected 2019 EBITDA.
Notably, Enbridge is least exposed to the volatility in commodity prices owing to long-term midstream contracts, reflecting its low-risk business model.
Growth Projects & Strong Financials
The company has $19 billion worth of capital projects that include few developments that have already been placed online and the rest are likely to be in service in the coming years. This has further strengthened the company’s existing operations with strong cashflow visibility.
Enbridge has a healthy balance sheet with its debt to EBITDA ratio declining significantly since 2016. The company expects the ratio to decline further in the coming years.
Other Stocks to Consider
Other prospective players in the energy space are World Fuel Services Corporation INT, Delek Logistics Partners, L.P. DKL and TC PipeLines, LP TCP. All the stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
World Fuel beat the Zacks Consensus Estimate in each of the prior four quarters, the average positive earnings surprise being 16.4%.
Delek Logistics is likely to see earnings growth of 4.9% through 2019.
TC PipeLines has an average positive earnings surprise of 12.6% for the past four quarters.
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Delek Logistics Partners, L.P. (DKL) : Free Stock Analysis Report
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Enbridge Inc (ENB) : Free Stock Analysis Report
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