What Led to Enbridge Energy Partners’ Lower Earnings in 3Q17
Earnings in 3Q17
Enbridge Energy Partners (EEP), a subsidiary of Enbridge (ENB), saw its EBITDA (earnings before interest, tax, depreciation, and amortization) fall 6.7% to $426 million in 3Q17 from $457 million in 3Q16. However, the partnership beat its 3Q17 EBITDA estimate by 5.5%.
The YoY (year-over-year) fall in the partnership’s 3Q17 EBITDA was mainly due to its natural gas business divestment, sale of the Ozark pipeline system, and throughput volume decline along the North Dakota system. Following the divestment of its natural gas business, the partnership will now focus solely on its liquids business.
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Distribution in 3Q17
EEP declared a flat distribution of $0.35 per unit for the third quarter. The partnership’s 3Q17 distribution represents a 40% YoY fall from 3Q16. Based on its recent distribution, EEP is currently trading at a high distribution yield of 9.7%. EEP’s distributable cash flow fell 9.8% to $193.6 million in 3Q17 from $214.7 million in 3Q16, driving its distribution coverage lower.
Of the analysts covering Enbridge Energy Partners, 81.8% had recommended “hold” and the remaining 18.2% had recommended “buy” as of November 8. EEP was downgraded by Morgan Stanley to “equal-weight,” which is equivalent to “hold,” in June 2017. EEP is currently trading below the low range ($16) of analysts’ target price. EEP’s average target price of $18.40 implies a 27% potential upside based on its current price.