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Will Spectra Energy Keep Outperforming in 2016?

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Aug. 18 2020, Updated 9:24 a.m. ET

SE outperforms peers

Spectra Energy (SE) has risen 27% since the start of 2016. In comparison, ONEOK (OKE) has risen 45% in the same period. Energy Transfer Partners (ETP) and Enbridge Energy Partners (EEP) have fallen 3% and 9%, respectively, since the start of the year. The Alerian MLP ETF (AMLP), which holds top infrastructure MLPs, has fallen 2%.

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Outlook for SE

A 9.5% increase in quarterly dividends in January’s 4Q15 results was in line with guidance, and the strong 2016 guidance announced in February helped SE’s outperformance in 2016 so far. The company reaffirmed its 2016 guidance during its 1Q16 earnings announcement.

“These results, which illustrate our stable, reliable and disciplined business model, continue to give us confidence in our ability to deliver on the plan we outlined to investors in February,” said Greg Ebel, CEO.

Expansion projects to drive growth

On April 4, Spectra Energy announced a public offering of 14 million shares of its common stock for gross proceeds of ~$420 million. The proceeds will purchase common units of Spectra Energy Partners (SEP).

“Spectra Energy benefits from the flexibility of multiple financing options across the corporation. This allows us to access capital markets at favorable rates and fund our $8 billion of secured expansion projects, as demonstrated by our recent successful equity raises. Those expansion projects are advancing as planned, and we continue to make great progress on projects under development. Most notably, we moved closer to placing Access Northeast – our solution to lower electricity costs and improve electric reliability in New England – into execution,” said Ebel.

Analyst recommendations

Of analysts surveyed by Bloomberg, 37.5% rate Spectra Energy a “buy” and 56% rate the stock a “hold.” Only 6.5% rate it a “sell.” The consensus target price for Spectra Energy is $32.8. Currently, its stock is trading at $30.5. If the stock reaches this target price within a year, it would mean a 7.5% price return for investors.

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