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Is a Beat in Store for Enbridge (ENB) This Earnings Season?

Enbridge IncENB is expected to report third-quarter 2018 earnings on Nov 2, before the opening bell.

The energy infrastructure player beat the Zacks Consensus Estimate in the last reported quarter, the positive earnings surprise being 47.6%. Moreover, the company has an average positive earnings surprise of 35.3% in the trailing four quarters.

Enbridge Inc Price and EPS Surprise

Enbridge Inc Price and EPS Surprise | Enbridge Inc Quote

Let's see how things are shaping up for this announcement.

Which Way are Estimates Treading?

Let's look at the estimate revision trend to get a clear picture of what analysts expect from the upcoming quarterly release.

The Zacks Consensus Estimate of 42 cents for third-quarter 2018 earnings has seen one upward movement and a downward revision by firms in the past 30 days. It reflects an improvement of 7.7% from the year-ago quarter's figure.

Earnings Whisper

Our proven model shows that Enbridge is likely to beat estimates this quarter. A stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP : Enbridge's Earnings ESP is +5.26%. This is because the Most Accurate Estimate is at 44 cents and the Zacks Consensus Estimate is pegged at 42 cents. A favorable ESP is a leading indicator of a likely positive surprise. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : Enbridge sports a Zacks Rank #1.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

Factors to Consider

Enbridge has the longest and most advanced crude and liquids pipeline system in the world that is spread over 17,018 miles. In Canada, the company is considered to be the largest natural gas distributer. Hence, it is obvious that a significant portion of the company's earnings is generated from transportation operations, driven by a string of long-term contracts. The substantial contract base is likely to provide the company with stable cash flow in the upcoming quarters.

Moreover, the acquisition of Spectra Energy will include leading natural gas transportation and storage assets to Enbridge's portfolio. The merger has enabled the company to diversify asset portfolio as well as generate cash flow from natural gas and oil midstream infrastructure properties. Enbridge has become the largest energy infrastructure company in North America following the acquisition. The positivity from the deal is likely to be reflected in the to-be-reported quarter.

Recently, Enbridge decided to purchase all of the outstanding stocks of three North American units - Enbridge Energy Partners, L.P., Enbridge Energy Management, L.L.C. and Enbridge Income Fund Holdings Inc - for about $7.1 billion. By transferring all the sponsored vehicles under a single roof, the company can considerably lower the complexity of the organizational structure and financial reporting. Transferring the core assets under a single entity is likely to be a prudent move for expanding investment appeal and attracting premium valuation.

Other Stocks to Consider

Here are a few other companies, which per our model have the right combination of elements to post an earnings beat in the quarter to be reported.

Enterprise Products Partners L.P. EPD , based in Houston, TX, is a leading midstream energy player in North America. The company has an Earnings ESP of +0.89% and carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Plano, TX-based Denbury Resources Inc DNR is an exploration and production (E&P) company engaged in the acquisition, development, operation and exploration of oil as well asnatural gas properties. The company has an Earnings ESP of +10.15% and carries a Zacks Rank #3.

Houston, TX-based Ensco plc ESV is a leading supplier of offshore contract drilling services to the oil and gas industry. The company has an Earnings ESP of +3.65% and a Zacks Rank #3.

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


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

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