3 Takeaways From Enbridge Inc’s (TSX:ENB) Q3 Results

Enbridge Inc (TSX:ENB)(NYSE:ENB) showed strong growth in Q3, but is it enough to make investors bullish on the stock?

| More on:

Enbridge (TSX:ENB)(NYSE:ENB) released its Q3 earnings on Friday. The results were a little disappointing, as the company recorded a loss of $90 million, which is down from a profit of $765 million a year ago. Sales of $11.3 billion were well up from the $9.2 billion that the company recorded a year ago, but, unfortunately, impairment costs brought the company’s financials into the negative.

Let’s take a closer look at the results to see how Enbridge did and whether investors should consider buying the stock. Below are three key takeaways from the company’s most recent earnings report.

Operating expenses soar due to one-time charges

As impressive as Enbridge’s 23% sales growth was, its operating expenses saw an even bigger increase, rising 36% year over year. The reasons for the increase were primarily higher commodity costs, which were up 36%, or about $1.8 billion, as well as goodwill impairment costs of $1 billion that were not incurred in the prior year.

A positive takeaway for investors is that if not for the non-recurring write-down, the company’s operating income would have been up 26% from a year ago. Instead, operating income came in at $854 million, nearly half of the $1.49 billion that was generated last year.

Cash flow remains strong

I’m generally not too concerned with a company’s income statement, since it can be subject to a lot of manipulation and noise, and looking at the statement of cash flow can offer a lot more insight, and here, Enbridge did very well.

Despite earnings being lower, the company’s operating cash flow came in a shade under $8 billion for the trailing nine months, as it was able to add back impairment charges and depreciation. Last year, the company only generated $5.3 billion in operating cash flow during the same period.

Enbridge did have less capital spending over the past nine months, and it was able to offset a lot of those costs with proceeds from dispositions and investments, which resulted in investing activities only using up $3 billion in cash, giving the company a lot of free cash flow.

Line 3 construction slated for early next year

In its earnings release, Enbridge stated that construction on the Line 3 Replacement project, which was approved earlier this year, is expected to start in Q1 of 2019. It’s an important milestone on a project that will hopefully generate significant growth for the company over the long term.

Should you buy Enbridge on these results?

The company had a strong quarter with good growth numbers and a solid bottom line, despite impairment charges weighing down the results.

While it will come as a bit of a disappointment that the company is discontinuing its dividend-reinvestment program, investors will still be getting a good yield on a stock that has a lot of upside and opportunity to grow, particularly with the Line 3 program set to go.

The stock has failed to generate much momentum this year, but Enbridge is still a solid, long-term buy, and it could generate significant returns for investors that aren’t afraid of taking on a little risk.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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

More on Dividend Stocks

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

These top dividend stocks both offer attractive yields and trade off their highs, making them two of the best to…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Invest Your $7,000 TFSA Contribution in 2024

Here's how I would prioritize a $7,000 TFSA contribution for growth and income.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

CPP Pensioners: Watch for These Important Updates

The CPP is an excellent tool for retirees, but be sure to stay on top of important updates like these.

Read more »

Technology
Dividend Stocks

TFSA Investors: 3 Dividend Stocks I’d Buy and Hold Forever

These TSX dividend stocks are likely to help TFSA investors earn steady and growing passive income for decades.

Read more »

four people hold happy emoji masks
Dividend Stocks

Love Dividend Growth? Check Out These 2 Income-Boosting Stocks

National Bank of Canada (TSX:NA) and another Canadian dividend-growth stock are looking like a bargain going into December 2024.

Read more »

An investor uses a tablet
Dividend Stocks

A Dividend Giant I’d Buy Over Enbridge Stock Right Now

Enbridge stock may seem like the best of the best in terms of dividends, but honestly this one is far…

Read more »