| $70.70→ | 5/11/2018 | 05/11/2017 | 05/11/2016 | 05/11/2015 | 05/11/2014 |
|---|---|---|---|---|---|
| Active Rigs | 60 | 51 | 27 | 85 | 192 |
Summary
- Back in March, with its NYSE shares trading at $33.50, I suggested that ENB was 40% undervalued.
- Shares probed under $30 in April, looking for a bottom. I think that got management's attention.
- As expected, due to natural gas seasonality and a full quarter of Spectra contributions, the Q1 EPS yoy comparison was a breeze.
- But the recent strength in the stock is due more to announced and potential asset sales to address the market's big concern: Debt.
As I suggested in my March article on Enbridge, Q1 year-over-year comparisons would be easy considering it would be the first full Q1 worth of Spectra contributions, as well as a seasonally strong quarter for the natural gas businesses.
That said, I was pleasantly surprised with the Liquids Pipelines Mainline System Segment - which delivered its highest ever quarterly volume. But it was the announcement of ~$3 billion in asset sales, as well as reported strong bidding for additional midstream assets, that put a bid in the languishing stock. It is clear investors want management to regain investor confidence by selling non-core assets and addressing the big concern: The debt load needed to fund the Spectra merger.
The Q1 EPS report was generally bullish with adjusted EPS of $0.82 exceeding average analyst expectations by $0.18/share. As shown in the graphic below, while yoy EBITDA and net earnings were lower, cash from operations ("CFO") was up 80%, while distributable cash flow ("DCF") was up a whopping 90%.
Management has certainly gotten the message with respect to investor concern over the high debt level and the significant interest expense. And it should have - the ~25% sell-off in the shares after the Spectra merger left some to wash off egg on their faces.
However, it would appear the low is in, the 6.3% yield is safe and secure, and the prospect of further asset sale announcement this year could propel ENB closer to the $40 level than the $30 level it has been hovering around for most of this year.
Disclaimer: this is not an investment site. Do not make any investment or financial decisions based on what you read here or what you think you may have read here.ENB is a buy for income-oriented investors who also want to take a flyer on additional asset sale announcements that could easily add another $4-5/share in capital appreciation.
The first piece of evidence is North Korea. When Trump was trading crude, back-alley swipes with “Little Rocket Man,” Kim Jong-un, about whose nuclear button was bigger, it sounded as if we were heading for a nuclear holocaust led by a pair of overgrown prepubescents.
In fact, Trump’s bellicosity seems to have worked. It’s impossible to know how things will pan out, but the situation with North Korea today is a lot better than it was six months ago. Hostages are being released, talks are being held. There seems to be a chance for progress unfelt in years.
Maybe Trump intuited something about the sorts of people who run the North Korean regime that others missed.
Comment: well, duh.
Comment: "bellicosity" or "persuasion"? LOL.
| $71.23→ | 5/11/2018 | 05/11/2017 | 05/11/2016 | 05/11/2015 | 05/11/2014 |
|---|---|---|---|---|---|
| Active Rigs | 60 | 51 | 27 | 85 | 192 |
Almost every single time a company's stock price had a total collapse, it was preceded by a crush in the same company's bond prices up to a year before.
Ford and GM in 2009, American Airlines, Blockbuster, Enron, Boeing in 2001, you name it.
It's extremely rare for a company's bond to crash while its stock price keeps going up for much longer. I can't even think of a single example where this happened before.
| $71.30→ | 5/11/2018 | 05/11/2017 | 05/11/2016 | 05/11/2015 | 05/11/2014 |
|---|---|---|---|---|---|
| Active Rigs | 60 | 51 | 27 | 85 | 192 |
