11:36 AM EDT, 10/06/2021 (MT Newswires) -- Tudor, Pickering and Holt on Wednesday reiterated its buy rating on the shares of Enbridge (ENB.TO) and its C$54.00 target price following the completion of its Line 3 Replacement pipeline project, even as it expects the pipeline and power company to miss consensus expectations for its third-quarter results.
"We have seen an uptick in client interest on Enbridge due to the recent in-service of Line 3, an approaching Mainline decision, the Canadian government intervening in the Line 5 situation, and the recent ESG forum," analyst Matt Taylor said in a note. "These topics will likely outweigh interest in quarterly results as we are modeling a modest miss versus the Street at C$3.16B (-2%), but in-line with FY results of C$14.03B compared to guidance of C$13.9-14.3B. We foresee the weaker results driven by seasonally lower contributions from Gas Transmission and reduced Energy Services margins offset by improving Mainline volumes. With Line 3 now in-service, we suspect several Liquids themes to be constructive for the stock: 1) 2022 cash flow inflection from increased Mainline barrels provides financial flexibility, 2) Positive regulatory approval for contracting the Mainline long-term, and 3) Execution of long-waited expansion of downstream capacity. Limited detail should be provided during Q3 as a regulatory decision on the Mainline is not anticipated until November, but we expect the December investor day to be received positively by investors. We continue to view the near-term shut-down of Line 5 as unlikely and see the recent news of the Canadian government invoking the 1977 treaty as constructive. Overall, with the 2022e FCF yield doubling to 8% providing financial flexibility, long-term cash flow certainty stemming from the Mainline contracting decision, and unique exposure in the midstream sector to ESG themes, we remain Buy-rated."