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How Mid-Cap and Large-Cap MLPs Performed in 2Q17

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Part 6
How Mid-Cap and Large-Cap MLPs Performed in 2Q17 PART 6 OF 10

What Drove Enbridge Energy Partners’ 2Q17 Earnings Lower?

EEP posted 18.9% YoY EBITDA decline in 2Q17

Enbridge Energy Partners (EEP) and its GP (general partner), Enbridge (ENB), reported their 2Q17 earnings on August 2, 2017. EEP’s adjusted EBITDA fell to $396.6 million in 2Q17 compared to $489.3 million in 2Q16, a YoY fall of 18.9%. Moreover, the partnership missed its 2Q17 EBITDA estimate by 2.7%.

The YoY decline in the partnership’s 2Q17 EBITDA was mainly driven by the sale of the Ozark pipeline system, lower crude movements by rail, and the divestment of the natural gas business.


What Drove Enbridge Energy Partners’ 2Q17 Earnings Lower?

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EEP’s distributable cash flow fell to $182.5 million in 2Q17 compared to $262.7 million in 2Q16, a YoY decline of 30.5%. This drove EEP’s distribution coverage lower.

EEP quarterly distribution was down 40% in 2Q17

Enbridge Energy Partners declared a flat distribution of $0.35 per unit in the recent quarter. The partnership’s 2Q17 distribution represents a YoY decline of 40% compared to the same quarter in the prior year. EEP had cut its distribution from $0.58 per unit to $0.35 per unit in 1Q17 to improve its distribution coverage and balance sheet position.

Analyst recommendations

76.9% of analysts rate Enbridge Energy Partners a “hold,” 15.4% rate it a “buy,” and the remaining 7.7% rate it a “sell” as of August 7. EEP was recently downgraded by Morgan Stanley to “equal weight,” which is equivalent to a “hold.” Overall, the partnership has seen four rating updates since the beginning of this year including three downgrades and one new coverage. EEP’s average target price of $18.7 implies a 26.4% return from its current price levels.

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