23 Oct

Half of Analysts Rate Enbridge Energy Partners a ‘Hold’

WRITTEN BY Rekha Khandelwal, CFA

Analyst recommendations

Of the analysts surveyed by Bloomberg, 43% rated Enbridge Energy Partners (EEP) a “buy,” and 50% rated it a “hold.” Meanwhile, 7% of analysts rated it a “sell.” The consensus target price for Enbridge Energy Partners is $34.9. Its units currently trade near $27.5. If the stock does attain this target price within a year, it would mean a 27% price return for investors.

Half of Analysts Rate Enbridge Energy Partners a ‘Hold’

Target prices

Enbridge Energy Partners’ low distribution coverage, high leverage, and low expected distribution growth may have contributed to a low percentage of “buy” recommendations. The partnership has increased its distributions only three times in the last ten quarters. Analysts are probably uncertain about its future prospects and would like to see its 3Q15 results before taking a decision on its units.

The table above shows recommendations and target prices for Enbridge Energy Partners from some of the brokers that were surveyed. The partnership forms ~1.6% of the Global X SuperDividend US ETF (DIV).

As for its peers, 75% of analysts rated Sunoco Logistics (SXL) a “buy,” while 81% rated Magellan Midstream Partners (MMP) a “buy.” Also, 63% of analysts rated Plains All American Pipeline (PAA) a “buy.”

Outlook for Enbridge Energy Partners

Enbridge Energy Partners believes that a large-scale drop-down from Enbridge Inc. (ENB) will not be initiated in 2015 given the current market conditions, and this may strain its distribution growth. The company’s Natural Gas segment is already struggling in the current commodity price environment.

However, the MLP should benefit from ongoing capital growth projects. It currently has more than $10 billion of liquids pipeline organic growth projects under various stages of development. Though big drop-downs from Enbridge Inc. are not likely in 2015, they are still very likely in the future. Enbridge Energy Partners targets a 2%–5% annual distribution growth. This might be enhanced based on drop-downs from Enbridge Inc.

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