Analyst Actions: Credit Suisse Analyzes Q2 From Enbridge, Down 2%
Earnings review: "Enbridge reported Q2 2011 headline diluted EPS of C$0.34 and adjusted EPS of $0.34. That adjusted figure slightly exceeded our C$0.33 estimate and the Street's C$0.325 view and fell within the C$0.31-C$0.35 range. We note some key points including: (a) ENB stated Q2 ran slightly ahead of original expectations; (b) the full year outlook is now "trending toward the upper half" of 2011 adjusted EPS guidance of C$1.38 to C$1.48; (c) average Canadian Mainline volumes decreased to 2.07mbpd in Q2 2011 from 2.21mbpd in Q2 2010; and, (d) other liquids pipelines volumes were lower on a year-over-year basis. In a rather typical Enbridge fashion, the results were relatively consistent and slightly ahead of expectations. In light of the long-dated nature of much of our coverage universe, we do not place undue emphasis on quarterly earnings results. Our full year EPS estimates for 2011/2013 is raised to $1.47/$1.68 (from $1.43/$1.64) respectively. Our 2012 EPS remains unchanged."
Selected highlights: "Notable points include: (a) adjusted earnings for all operating segments except the liquids segment were higher in Q2 2011 compared to Q2 2010; (b) average Canadian Mainline volumes decreased 6.3% from Q2 2010 and decreased by 10.8% from Q1 2011 levels; (c) Regional Oil Sands System average volumes decreased 2.7% from Q2 2010 and 12.8% versus Q1 2011, and, (d) created a senior management role largely dedicated for the Gateway project."
Investment thesis: "We believe Enbridge has an attractive and unique asset base capable of sustained growth. In our view, Enbridge may be viewed as a core holding with one of North America's largest infrastructure footprints."
Valuation: "Our Neutral rating and C$31.00 target price is obtained from multiple valuation approaches, including: a 19.5x P/E multiple on 2012e EPS; a 3.4% dividend yield; and, a 10.5x EV/EBITDA multiple. We reiterate our Neutral rating."
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