Enbridge Reports Loss, Should Investors Be Concerned?

The company’s first loss in two years sounds worse than it is.

| More on:
The Motley Fool

For the first time in two years, Enbridge Inc. (TSX:ENB)(NYSE:ENB) posted a quarterly loss – earnings per share came in at -$0.32 for the fourth quarter of last year.

There is no need to be alarmed; it was hedging costs that made the difference. On an adjusted basis, Enbridge put up a gain of $0.44 per share, just a penny shy of analyst estimates. The company was also able to surpass revenue expectations, with sales of $8.3 billion in the fourth quarter, an 18% increase year over year.

Investors should not be worried or upset by the hedging losses, because hedging is an integral part of the company’s strategy. As the company put it in its latest press release, “the Company believes that the hedging program supports the generation of reliable cash flows and dividend growth.” In today’s environment, it is those two things that investors demand most, and have played a major part in Enbridge’s share price doubling over the past four years.

Enbridge’s fourth quarter will probably be best remembered for the positive developments regarding its proposed Northern Gateway pipeline. Although the $6.5 billion project still has many determined opponents, the National Energy Board’s decision in December to recommend the project was a major step forward.

The future continues to look bright for Enbridge. With oil sands output set to double to 4.5 million barrels per day by 2025, energy producers will need Enbridge to move that product to coasts and refineries. The company is planning to invest $36 billion (almost as much as its $40 billion market capitalization) worth of projects through 2017, and given the need for pipeline infrastructure, those projects will likely end up being worth the investment.

These same dynamics are also benefiting Canada’s other major pipeline operator, Transcanada Corporation (TSX:TRP)(NYSE:TRP). Not surprisingly, Transcanada is spending a similar amount of money on new projects ($38 billion) by the end of the decade. Also like Enbridge, Transcanada has been able to provide its investors with a smooth earnings profile, which helps explain why the company’s shares trade at 25 times earnings.

Foolish bottom line

Most importantly for Enbridge, the general story remains the same. The company is loved for its smooth earnings profile, which has allowed it to make every dividend payment for 60 years. Investors who put a major emphasis on consistent earnings should consider owning the shares. And those who do own the shares surely can sleep easily.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no positions in any of the stocks mentioned in this article.

More on Investing

question marks written reminders tickets
Stocks for Beginners

Where Will Aritzia Stock Be in 3 Years?

Aritzia (TSX:ATZ) stock may have come down from all-time highs, but a new CEO and renewed U.S. focus makes it…

Read more »

edit Sale sign, value, discount
Investing

The Market Is Being Too Hard on These Growth Stocks Going for a Discount

These three growth stocks look like excellent buys, given their higher growth prospects and discounted stock prices.

Read more »

Retirement plan
Investing

3 Stocks I’m Adding to my Retirement Account in March

Well Health Technologies, Cineplex, and Fortis each have their own strengths that make them good buys for retirement planning.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Investing

Worried About a Market Collapse? Here Are 2 Stocks That Could Beat a Bear Market

Stocks have risen at a fast rate in 2024. Are you worried about a sudden market collapse? Here are two…

Read more »

stock research, analyze data
Dividend Stocks

Is it Too Late to Buy Dollarama Stock?

Dollarama (TSX:DOL) stock is up almost 200% from its 2020 lows. Is it still a buy?

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

Down by 25%: Is Canadian Tire Stock a Buy in February 2024?

Take a closer look at this Canadian retail stock if you are looking for low-cost additions to your self-directed portfolio…

Read more »

Golden crown on a red velvet background
Dividend Stocks

Cash Kings: The Top 2 Canadian Stocks That Pay Monthly

Two Canadian stocks are cash kings to income investors for their generous dividends and monthly payouts.

Read more »

Dice engraved with the words buy and sell
Bank Stocks

Royal Bank of Canada: Buy, Sell, or Hold After Solid Q1 2024 Earnings?

Royal Bank is up more than 20% from the 12-month low. Are more gains on the way?

Read more »