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Quarterly Results Roundup: MLPs' Performance in 3Q17

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Part 6
Quarterly Results Roundup: MLPs' Performance in 3Q17 PART 6 OF 14

What Drove Enable Midstream Partners’ Earnings Growth in 3Q17

Earnings in 3Q17

Midstream MLP Enable Midstream Partners (ENBL), involved in natural gas gathering, processing, and transportation, continued to see earnings growth in 3Q17. ENBL’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) rose 2.5% to $250 million in 3Q17 from $244 million in 3Q16. Moreover, the partnership beat its 3Q17 EBITDA estimate by 8.9%.

What Drove Enable Midstream Partners&#8217; Earnings Growth in 3Q17

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ENBL’s 3Q17 EBITDA growth was driven by higher natural gas throughput volumes. The partnership also benefited from wider gross margins due to a YoY increase in average natural gas and crude oil prices.

Distribution in 3Q17

The partnership declared a flat distribution of $0.32 per unit in the recent quarter. Based on its recent distribution, ENBL is trading at a distribution yield of 8.5%. ENBL ended 3Q17 with an impressive distribution coverage of 1.4x, driven by strong distributable cash flow growth.

Outlook for 2018

Enable Midstream Partners announced its 2018 outlook during its 3Q17 earnings release. The partnership expects 2018 EBITDA and distributable cash flow of $945 million–$1.03 billion and $650 million–$710 million, respectively. It expects to end the year with a distribution coverage of 1.1x–1.3x.

The partnership expects to use the excess cash flow for funding growth projects. It expects to spend $450 million–$600 million during 2018, of which $330 million–$460 million is expected to be spent on gathering and processing expansion and the remaining $120 million–$140 million on transportation and storage expansion.

Analysts’ recommendations

Of the analysts covering Enable Midstream Partners, 50.0% had recommended “buy,” 30.0% had recommended “hold,” and the remaining 20.0% had recommended “sell” as of November 8, 2017. ENBL’s average target price of $17.10 implies a potential upside of ~10.0% based on its current price.

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