Enbridge’s (TSX:ENB) Q1 Profits Quadruple: Why the Time to Buy Is Now!
The Motley Fool
Published May 13, 2019 08:09
Updated May 13, 2019 08:36
Enbridge Inc (TSX:ENB)(NYSE:ENB) released its quarterly earnings on Friday that showed investors yet again why the stock is one of the strongest on the TSX. Although the company didn’t see much of an increase in sales, with its top line rising just 1% year over year, Enbridge saw a much stronger bottom line as it recorded a profit of over $2 billion for the quarter, four times the $510 million that it recorded a year ago.
Why was there such a big improvement? The main reason for the stronger profit this past quarter was that unlike a year ago, Enbridge didn’t record an impairment loss, which last year added over $1 billion in costs to the company’s financials. Without those costs being incurred this year along with a $432 million improvement (6%) in commodity costs, that helped reduce the company’s operating expenses by $1.5 billion. In total, operating income of $2.6 billion was noticeably higher than the $878 million that was generated in 2018.
Further down the statement, favourable foreign exchange gains of $214 million were also a big swing from the $185 million loss that Enbridge posted in the prior year. And had it not been for a much larger income tax expense this quarter ($584 million versus a recovery of $73 million), net income would have seen an even bigger improvement. Pre-tax earnings of $2.6 billion were about six times last year’s tally of $437 million.
The great news for investors is that Enbridge saw a terrific improvement in Q1 despite having just a nominal increase in sales. With a lot less noise out of the financials thanks to no impairment losses being incurred, the company was able to generate a lot more net income.
An even stronger 2020? One of the key metrics the company tracks is distributable cash flow (DCF), which in the first quarter reached $2.8 billion, up from $2.3 billion a year ago. And while the guidance for the rest of 2019 remains unchanged, there’s hope that 2020 could look a lot stronger, especially with Line 3 potentially being complete by then.
In the earnings release, CEO Al Monaco stated that there was good progress being made on the project: ” In Canada, we expect to have construction complete on this segment of the line by the end of May. And in Minnesota, we now have permitting timelines from the state’s agencies that support issuance of the environmental permitting by November. We’re working closely with these agencies and we expect to bring the full project into service within the second half of 2020, subject to timely permitting approvals.”
Get The App
However, given the challenges the company has faced thus far, investors might still be a little skeptical.
Do these results make Enbridge a buy? With another strong quarter in the books, the performance in Q1 helps demonstrate to investors that the stock is still a strong one and that these are the types of quarters that can be expected from the company. And if there’s progress on the Line 3 replacement project and other pipelines, it could lead to even strong results for Enbridge down the road.
While the stock may be struggling to stay above $50 today, it could be a great time to consider buying it as the future certainly looks promising.
Fool contributor David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2019
This Article Was First Published on The Motley Fool
Written By: The Motley Fool
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.