Morningstar | Strong Lakehead Volumes Fuel Enbridge Energy Partners' Earnings Beat
Narrow-moat Enbridge Energy Partners reported third-quarter adjusted EBITDA of $380 million, a decrease of 5% from the year-ago quarter. Decreased performance was a result of the tax disallowance regulation established by the Federal Energy Regulatory Commission. However, adjusted EBITDA was ahead of our expectations and up 6% sequentially owing to a continued strong performance on the Lakehead system. Distributable cash flow also decreased 5% from the year-ago quarter to $184 million for the same factor above. Like adjusted EBITDA, distributable cash flow surpassed our expectations and rose 11% sequentially for the same factors above.Enbridge Energy Partners maintained its quarterly distribution of $0.35 per unit. On an annualized basis, the 2018 distribution represents a 13% return to investors, among the highest of the master limited partnerships we cover.
Enbridge Energy Partners will soon be acquired by Enbridge, Inc., and thus, we are maintaining our $16 fair value estimate, which is based on an estimated conversion rate to Enbridge Inc.’s shares.
As a reminder, Best Idea Enbridge entered into an agreement to acquire the remaining outstanding shares of Enbridge Energy Partners in a deal worth approximately CAD 3.2 billion based on Enbridge’s Sept. 17, 2018, closing price. Under the deal, Enbridge will issue 0.335 shares for each unit of Enbridge Energy Partners, approximating 72 million shares. The increased purchase price represents a 9% increase from the initial proposal in May and a 3% increase to our expectations.
We consider Enbridge a rare triple threat, boasting a wide moat, an attractive 6.5% dividend yield, and a cheap valuation. While the market continues to place too much emphasis on the dividend and overlook the impact that the growth portfolio will have on future cash flows and the balance sheet, the time is right for long-term investors to capitalize on the stock's considerable upside while collecting a steady stream of growing income.
Please refer to our January report, "Best Idea Enbridge Is a Triple Threat," for a deeper dive into Enbridge Inc.
Enbridge is an energy transportation and distribution companyoperating in 5 segments: Liquids Pipelines, consists of common carrier and contract crude oil, natural gas liquids and refined products pipelines and terminals; Gas Distribution, of Co.'s natural gas utility operations; Gas Pipelines and Processi consists of investments in natural gas pipelines and processing facilities; Green Power and Transmission, consists of Co.'s investments in renewable energy assets and transmission facilities; and Energy Services, consist of physical commodity marketing activity and logistical services.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.