Target Raises C/W Comments-G&M RBC Dominion Securities Robert Kwan believes the first-quarter results from Enbridge Inc. (
) highlight how its “two-pronged growth strategy that focuses on both conventional energy and low-carbon growth has the potential to deliver a multitude of attractive growth projects.”
“Enbridge’s diversified infrastructure footprint is well-positioned to capture growth from both conventional energy initiatives as well as energy transition initiatives,” he added. “For example, the company is poised to benefit from the ‘energy security’ theme via numerous pipeline projects to serve growing third-party LNG export capacity. On the energy transition side, Enbridge has numerous irons in the fire that lever off its existing assets including recent developments for carbon capture, utilization and storage (CCUS) in Alberta, as well as a newly-announced potential joint venture for low-carbon hydrogen and ammonia production and exports to be located at Enbridge’s Ingleside terminal.”
Mr. Kwan called the results, while were in line with expectations, and reaffirmation of its guidance on Friday as “a solid start to 2022.”
“Relative to its original target, Enbridge noted thatstrong operational performance is expected to be offset by challenging market conditions, which continue to impact Energy Services, along with moderately higher financing costs, due to rising interest rates,” he said.
Calling its capital allocation plan “a nice mix of action and messaging,” the analyst added: “Despite the improved growth outlook as the energy security theme comes to the forefront, Enbridge has kept its eye on the ball when it comes to capital allocation, which featured one million shares being repurchased in Q1/22.”
Keeping an “outperform” rating for its shares, Mr. Kwan raised his target to $65 from $60, exceeding the $59.53 average.
“We believe the stock will continue to benefit from its focus on capital allocation (i.e., share buybacks; reducing leverage), higher dividend yield, and greater optionality from energy security themes and high commodity prices versus its regulated utility peers,” he said.
Elsewhere, National Bank Financial’s Patrick Kenny raised his target to $60 from $57 with an “outperform” rating.