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Enbridge (ENB -3.5%) plunges as Scotiabank downgraded shares to Sector Perform from Sector Outperform with a C$58 price target on valuation after beating most midstream peers with a 12% YTD return.
Scotiabank analyst Robert Hope said he remains positive on Enbridge overall, but sees limited room for further valuation expansion and upward estimate revisions relative to peers.
Hope said Enbridge's Mainline Q4 EBITDA of $1.2B came in well below his $1.41B estimate, as the company took a provision for lower tolls for H2 2021, which accounted for a majority of the miss and "partially one time in nature," while the company's other assets performed better than expected.
At the same time, Scotiabank upgraded Pembina Pipeline (PBA -0.2%) to Sector Outperform from Sector Perform with a C$47 PT, up from C$43, saying the company is among the best positioned in the midstream group to benefit from the strong commodity price environment, as well as attractive valuation after shares underperformed peers.
Hope said the potential for positive catalysts far outweighs the potential for negative catalysts, including possible restarts for previously deferred projects, which would add to Pembina's longer-term growth outlook.
Pembina Pipeline yields more than 6% yet still looks undervalued, Double Dividend Stocks writes in a bullish analysis posted on Seeking Alpha.