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Should You Buy Enbridge Inc (TSX:ENB) Ahead of Earnings?

Enbridge (TSX:ENB)(NYSE:ENB) is expected to release its quarterly results this coming week, and for a stock that has been beaten up for much of the year, it might be a good buy, especially if the company can come up with a strong performance in Q3.

A struggling industry has done the company no favours

The price of oil has been relatively steady, even strong for the past quarter. The problem is that with a discounted price for Canadian crude, rising commodity prices haven’t had much of an impact for companies like Enbridge. And once you factor in political issues in Canada that have weighed down the industry, you’ve got a recipe where otherwise solid companies are trading well below where they should be.

It’s been frustrating to watch for investors, as rising oil prices have not translated into higher stock prices, and there’s no reason to expect that to change anytime soon. Year to date, Enbridge stock has declined around 14%.

Should you expect Enbridge to beat its earnings expectations?

The challenge for Enbridge is consistency, as over the past four quarters its profits have ranged between $291 million and $1.16 billion. Where it lands on that spectrum will have a big impact on what kind of reaction it will get from investors on earnings day.

With conditions in the industry a bit improved from where they were a year ago, I would be surprised if the company didn’t produce a good quarter, especially since cost efficiency should be a focus amid more challenging times ahead for oil and gas companies.

How the company has done in the past

Last quarter, Enbridge saw some good results, as profits soared to over $1 billion, although the company did benefit from lower tax expenses. The stock ended up seeing a little bit of an uptick from the strong quarter but ultimately fell further in price and it has declined 7% over the past three months.

Back in Q1, the company also had a strong performance and got a boost in price initially, but it would fall back down days later. Unfortunately, it’s clear that even if Enbridge were to have a good performance in Q3, the benefit might be short-lived.

Should you buy Enbridge?

Whether or not you decide to invest in Enbridge will come down to whether you’re bullish on the industry or not. After all, there aren’t many oil and gas stocks that could be better buys than Enbridge is today. The stock currently trades right around its book value and isn’t too far from its 52-week low. It offers a lot of value to investors and provides a great dividend as well.

Enbridge is definitely an undervalued stock, but how long it might take for it to see a sustained rally is the big question. Oil and gas stocks are a bit risky these days, and until we see better conditions in the industry, it’s going to be hard to see share prices gain momentum anytime soon.

For a long-term hold, however, Enbridge could be a great addition to your portfolio.

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Fool contributor David Jagielski has no position in any of the stocks mentioned. Enbridge is a recommendation of Stock Advisor Canada.

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