Enbridge Inc (USA) ENB reported strong second-quarter earnings on Aug. 3.
The Analyst
Bank Of America Merrill Lynch's Dennis P. Coleman upgraded Enbridge from Neutral to Buy and he increased his price target for the stock from $49 to $50.
The Thesis
The analyst continues to view the company as a "show me" story, but he upgraded the stock because he's more confident on its progress in project execution of the Line 3 Replacement project, funding and asset sales and the simplification of transactions. He added that uncertainties still exist, but the company deserves to be valued in line with its large-cap midstream/MLP peers because it managed to largely derisk its operations.
Investors have been concerned about funding and balance sheet of Enbridge, but the $7.5 billion from the announced asset sales will provide a good support for the company's $22 billion CapEx and $4 billion debt payment from 2018 to 2020, the analyst said.
"Enbridge is in a solid balance sheet position to eliminate the Dividend Reinvestment and Share Purchase Plan (DRIP) starting 2019 and is on track to achieve 5.0x leverage by year-end," Coleman said in the note.
Price Action
Enbridge closed Friday up 3.2 percent at $36.02.
Related Links:
Benzinga's Top Upgrades, Downgrades For August 17, 2018
Earnings Scheduled For August 3, 2018
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