Last week saw the newest yearly earnings release from Enbridge Inc. (TSE:ENB), an important milestone in the company’s journey to build a stronger business. Revenues of CA$50b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at CA$2.64, missing estimates by 8.6%. Earnings are an important time for investors, as they can track a company’s performance, look at what top analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. With this in mind, we’ve gathered the latest statutory forecasts to see what analysts are expecting for next year.
Following last week’s earnings report, Enbridge’s 14 analysts are forecasting 2020 revenues to be CA$49.5b, approximately in line with the last 12 months. Statutory per share are forecast to be CA$2.65, approximately in line with the last 12 months. In the lead-up to this report, analysts had been modelling revenues of CA$50.8b and earnings per share (EPS) of CA$2.69 in 2020. So it looks like analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is expected to maintain EPS.
The average price target was steady at CA$57.14 even though revenue estimates declined; likely suggesting analysts place a higher value on earnings. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Enbridge analyst has a price target of CA$65.00 per share, while the most pessimistic values it at CA$38.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Enbridge shareholders.
Further, we can compare these estimates to past performance, and see how Enbridge forecasts compare to the wider market’s forecast performance. We would highlight that sales are expected to reverse, with the forecast 1.1% revenue decline a notable change from historical growth of 9.1% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 3.3% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – analysts also expect Enbridge to grow slower than the wider market.
The Bottom Line
The most obvious conclusion from these results is that there’s been no major change in the business’ prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Still, earnings are more important to the long-term value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Enbridge going out to 2024, and you can see them free on our platform here.
You can also see whether Enbridge is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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