On today’s TSX Breakouts report, there are 46 stocks on the positive breakouts list (stocks with positive price momentum), and 15 stocks are on the negative breakouts list (stocks with negative price momentum).
The security highlighted today appeared on the positive breakouts list at the beginning of the month. Year-to-date, the share price is up over 15 per cent and analysts are anticipating further gains of over 13 per cent. In addition, the company has an attractive dividend yield, currently over 6 per cent. Patient investors may be rewarded. By November, all permits for the Line 3 replacement project may be received – a potential catalyst for the stock. The security has 16 buy recommendations.
Discussed below is Enbridge Inc. (ENB-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Calgary-based Enbridge is a leading energy infrastructure company in North America offering regulated gas distribution and has an extensive network of crude oil, liquids, and natural gas pipelines. Enbridge has a low-risk business model with roughly 98 per cent of the company’s EBITDA (earnings before interest, taxes, depreciation and amortization) generated from take-or-pay, regulated and fixed fee-based contracts.
On Fri. March 1, the company announced a disappointing development – a delay in the Line 3 replacement project. Given the State of Minnesota’s permitting timeline, management now expects an in-service date for the Line 3 replacement project to occur in the second half of 2020, pushed out from its previous expectations of late 2019. The news release stated, “The permitting timeline indicates that the certifications on all remaining State permits required for the construction of Line 3 will be provided by this November. Enbridge anticipates that the remaining Federal permits will be finalized approximately 30 to 60 days thereafter… In light of this permitting timeline, the company is developing a revised construction schedule for the Line 3 Replacement Project, but now expects an in-service date during the second half of 2020.” The following trading day, the share price fell by nearly 6 per cent, closing at $46.65 on Mon. March 4.
Before the market opened on Feb. 15, the company reported solid fourth-quarter financial results. Adjusted EBTIDA came in at $3.32-billion, ahead of the consensus estimate of $3.25-billion. Distributable cash flow was $1.03. Adjusted earnings per share was 65 cents, surpassing the consensus estimate of 62 cents.
The company will be holding its annual general meeting on May 8.
The stock is dual-listed, trading on both the Toronto Stock Exchange and New York Stock Exchange under the same ticker, ENB.
Dividend policy
Management is committed to its dividend policy. Enbridge pays its shareholders a quarterly dividend of 73.8 cents per share, or approximately $2.95 per share yearly. This equates an annualized dividend yield of 6.1 per cent.
The company has increased its dividend for 24 consecutive years. Management targets delivering a three-year dividend compound annual growth rate of 10 per cent between 2018 and 2020 with an anticipated payout ratio below 65 per cent.
Financial forecasts
For 2019, management anticipates EBITDA to come in at approximately $13-billion and distributable cash flow per share to fall between $4.30 and $4.60.
The Street is forecasting EBITDA of $13-billion in 2019, rising to $14.1-billion in 2020.
Analysts’ recommendations
There are 21 analysts that actively cover this company, of which 16 analysts have buy recommendations and five analysts have hold recommendations.
Revised recommendations
Analysts have made relatively minor revisions to their target prices.
Earlier this month, Ian Gillies, an analyst from GMP FirstEnergy, reduced his target price by $2 to $55. Macquarie’s Tom Hems lowered his target price to $55 from $56. Scotiabank’s Robert Hope downgraded his recommendation to “sector perform” from “sector outperform” and cut his target price to $52 from $53. Tudor Pickering’s Matthew Taylor lowered his target price by $1 to $49. BMO’s Ben Pham trimmed his target price by $2 to $57. Evercore ISI’s Daniel Walk downgraded his recommendation to “in-line” from “outperform.”
Valuation
Analysts commonly value the stock on a discounted cash flow basis. The consensus one-year target price is $55.28, suggesting the stock may deliver a price return of over 13 per cent over the next 12 months, including the 6 per cent yield, this equates to a potential total return of over 19 per cent.
Target prices range from a low of $49 (from Matthew Taylor, the analyst at Tudor Pickering) to a high of $64.50 (from Darryl McCoubrey, the analyst at Veritas Investment Research).
Insider transaction activity
On March 5, president and chief executive officer Al Monaco invested approximately $385,000 in shares of the company. He purchased 7,806 shares at an average price per share of $49.33, increasing his account’s holdings to 813,101 shares.
Chart watch
The share price continue to steadily recover from a downtrend that had been in place since 2015. Year-to-date, the share price is up nearly 15 per cent.
In terms of key resistance and support levels, there is initial overhead resistance around $50. After that, there is a ceiling of resistance around $55. Looking at the downside, there is initial technical support around $45, close to its 200-day moving average (at $44.75) and very strong technical support around $40.
The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company’s dividend policy, analysts’ recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.