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Why 63% of Analysts Call Enbridge Energy Partners a ‘Buy’

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EEP’s price targets

According to analysts surveyed by Bloomberg, the median target price for Enbridge Energy Partners (EEP) for the next year is $26.6. The low and high target prices for the stock over the same period are $21 and $29, respectively. The median target price implies a potential 12% return in a year, compared to EEP’s current price of $23.7.

63% of the analysts surveyed rated Enbridge Energy Partners as a “buy,” and the remaining 37% rated it as a “hold.” None of the analysts rated the stock as a “sell.”

As for other midstream companies, 60% rated Plains All American Pipeline (PAA) as a “hold,” and 63% rated Williams Partners (WPZ) as a “hold.” About 75% of analysts surveyed rated ONEOK Partners (OKS) as a “hold.”

EEP’s higher growth potential and strong capital projects have likely resulted in higher investor confidence in the stock. The above chart shows EEP’s year-to-date returns along with those of its peers.

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Outlook for EEP

The recently announced merger of Enbridge (ENB)—EEP’s sponsor—with Spectra Energy (SE) is likely to impact EEP. On its website, Enbridge has indicated that as part of the merger, its “existing U.S. sponsored vehicle strategy,” which includes EEP and Midcoast Energy Partners (MEP), “will be reviewed in context of the combined enterprise.”

At the same time, EEP is continuing with other plans, including the acquisition of interest in the Bakken Pipeline System. “The Bakken Pipeline System provides another important link to our liquids pipeline market access strategy,” said Mark Maki, EEP’s president, in the partnership’s 3Q16 earnings release.

Maki continued, “The system includes a significant level of take-or-pay contracts with high credit quality customers and the potential for expansion opportunities. The tentative joint funding arrangement with our general partner enhances the Partnership’s financing flexibility and strengthens our credit profile.”

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