Enbridge Downgraded to Strong Sell - Analyst Blog

By
A A A

On Oct 9, 2013, Zacks Investment Research downgraded oil and gas pipeline operator Enbridge Energy Partners, L.P. ( EEP ) to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

The partnership delivered a negative earnings surprise of 40.9% in the second quarter 2013. The long-term expected sales growth of Enbridge is set at a negative 2.77%.

The impact of the Cushing crude oil storage terminal outage, a low cash balance and rising natural gas and liquids inventory are acting as a growth deterrent for Enbridge Energy.

The partnership's cash balance dwindled 88% to $27.3 million as of Jun 30, 2013 from $227.9 million as of Dec 31, 2012. The 2010 Michigan oil spill has also been weighing on Enbridge's financials.

The high capital expenditure required for Enbridge's ambitious growth plans over the next few quarters may reduce cash distribution growth.

The partnership was also slapped with charges in Jul 2013 by the Environmental Protection Agency for permit violations for the discharge of hydrotest water in 2010 related to the Alberta Clipper Pipeline.

In addition, Enbridge's midstream natural gas business is likely to remain depressed in the upcoming quarters. The Energy Information Administration estimates a 5.5% decline in petroleum products prices in 2014 from 2012 which will affect Enbridge's returns.

Other Stocks to Consider

However, all industry players are not doing as badly as Enbridge Energy Partners. Stocks presently looking attractive are Zacks Ranked #2 (Buy) Energy Transfer Partners, L.P. ( ETP ), Kinder Morgan Energy Partners, L.P. ( KMP ) and Magellan Midstream Partners L.P. ( MMP ).



ENBRIDGE EGY PT (EEP): Free Stock Analysis Report

KINDER MORG ENG (KMP): Free Stock Analysis Report


MAGELLAN MDSTRM (MMP): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Business , Stocks

Referenced Stocks: EEP , KMP , MMP

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Visualizing Healthcare MG
Visualizing Healthcare MG           
Power on/Power Off IPC
Power on/Power Off IPC              
Spot the Dropout RRC
Spot the Dropout RRC                
Power on/Power Off
Power on/Power Off                  

Stocks

Referenced

Most Active by Volume

105,858,039
  • $10.50 ▲ 3.04%
105,433,684
  • $29.22 ▲ 4.62%
72,716,790
  • $16.36 ▼ 0.49%
51,381,067
  • $113.29 ▲ 0.33%
47,443,661
  • $2.39 ▲ 4.82%
45,387,229
  • $5.78 ▲ 0.87%
45,001,566
  • $105.62 ▼ 0.02%
42,379,286
  • $28.42 ▲ 2.53%
As of 8/28/2015, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com