Is Enbridge Stock Still Worth Owning After Strong Q1 Earnings?

Last Friday, Enbridge Inc. ENB reported first-quarter 2025 earnings that exceeded expectations. This was driven by higher contributions from its major business segments like Liquids Pipelines, Gas Transmission, and Gas Distribution and Storage. Thus, the strong utilization of the asset base is contributing to a strong business outlook.Before analyzing the factors driving this positive outlook, let’s review the first-quarter results.ENB’s Q1 Earnings SnapshotEnbridge reported first-quarter adjusted earnings per share (EPS) of 72 cents, which beat the Zacks Consensus Estimate of 68 cents. The bottom line increased from the year-ago quarter’s level of 68 cents.Total quarterly revenues of $12.9 billion increased from $8.2 billion in the prior-year quarter. The top line also beat the Zacks Consensus Estimate of $9.5 billion. For more details, check our blog: Enbridge Q1 Earnings Beat Estimates, Revenues Increase Y/Y.Enterprise Products Partners LP EPD and Kinder Morgan, Inc. KMI are two other midstream energy giants and have already reported results.Incremental Cash Flows for ENB From its C$28B Project BacklogEnbridge is a leading midstream energy player in North America, operating an extensive crude oil and liquids transportation network spanning 18,085 miles — the world's longest and most complex system. ENB’s gas transportation pipeline network spans 71,308 miles, covering 31 U.S. states, four Canadian provinces and offshore areas in the Gulf of Mexico.Enbridge’s pipelines transport 20% of the total natural gas consumed in the United States. The company generates stable, fee-based revenues from these midstream assets, as they are booked by shippers on a long-term basis, minimizing commodity price volatility and volume risks.The midstream energy major will generate incremental cash flows from its C$28 billion backlog of secured capital projects, which include liquids pipelines, gas transmission, gas distribution and storage, and renewables. The maximum in-service date is 2029. Image Source: Enbridge Inc.ENB’s Stable Business Model & Investment-Grade Credit RatingThe minimization of commodity price volatility and volume risks in ENB’s business model stems from the fact that 98% of its EBITDA is supported by regulated or take-or-pay contracts. Moreover, more than 80% of the midstream energy firm’s profits are generated from activities where the company can automatically raise prices or fees. Thus, ENB is keeping pace with rising costs, which in turn protects its earnings and dividend payments even in a high inflationary environment.This stability in the business model is leading to its investment-grade credit rating while providing long-term visibility to cash flows.How the Midstream Majors EPD, KMI Fared in Q1Enterprise Products’ first-quarter 2025 adjusted earnings per limited partner unit of 64 cents missed the Zacks Consensus Estimate of 69 cents. The bottom line also declined from the year-ago level of 66 cents. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.) However, EPD’s total quarterly revenues of $15.4 billion beat the Zacks Consensus Estimate of $14.1 billion. The top line improved from $14.8 billion in the prior-year quarter.The weak quarterly earnings of Enterprise Products can be primarily attributed to weak petrochemical margins and lower crude oil marine terminal volumes despite record natural gas processing and pipeline volumes. For more details, check our article: Enterprise Q1 Earnings Miss Estimates, Revenues Increase Y/Y.Moreover, Kinder Morgan reported first-quarter adjusted earnings per share of 34 cents, which missed the Zacks Consensus Estimate of 35 cents. The bottom line remained flat year over year. KMI’s total quarterly revenues of $4.24 billion beat the Zacks Consensus Estimate of $4.14 billion. The top line increased from $3.84 billion in the prior-year quarter.The lower-than-expected quarterly earnings of KMI were primarily due to a planned turnaround at its condensate processing facility and increased operating costs. However, strong operational performance and higher contributions from its Natural Gas Pipelines, CO2 and Terminals segments helped offset the impact. For more details, visit our article: Kinder Morgan Q1 Earnings Miss Estimates, Revenues Increase Y/Y.Should Investors Bet on ENB?In its first quarter transcript, ENB mentioned that the Orange Grove Solar facility has officially started operating on time and budget. This demonstrates that Enbridge can execute capital-efficient renewable projects. As data centers are increasingly demanding cleaner energy, this creates more opportunities for ENB to build and invest more in renewable projects, securing stable and long-term cash flows.The positive developments have aided ENB to outpace the composite stocks belonging to the industry, as reflected in the six-month price chart. Over the period, the stock has gained 7.4%, surpassing the industry’s 4.9% jump.Six-Month Price Chart Image Source: Zacks Investment ResearchHowever, there are some uncertainties engulfing the stock. In the United States, changes to environmental approval processes, called NEPA reforms, are still being worked out, and it’s not clear how fast or easily future approvals will be. In Canada, policies like the carbon tax and bans on oil tankers along the West Coast could slow or block new projects. While Enbridge’s leaders sound hopeful, these issues depend on politicians making decisions, which can take time or shift depending on elections. Because of this, there’s a risk that new projects may be delayed or become more expensive, which could slow down the company’s growth plans.Also, the stock seems overvalued. ENB is trading at a 15.09x trailing 12-month Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortization (EV/EBITDA), which is at a premium compared with the broader industry average of 13.79x. Image Source: Zacks Investment ResearchThus, it might not be the right time to bet on the stock and wait for the uncertainties to subside. Those who have already invested may retain the stock, which carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Enterprise Products Partners L.P. (EPD): Free Stock Analysis Report Enbridge Inc (ENB): Free Stock Analysis Report Kinder Morgan, Inc. (KMI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks