Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
After taking a second look at Enbridge ENB, we are affirming our narrow moat rating, Medium Uncertainty Rating, and Standard Capital Allocation Rating. We are also increasing our fair value estimate to C$59 per share from C$56 after reviewing Enbridge’s project pipeline and adjusting for the recent strong performance by the Mainline system. The Mainline and liquids segment as a whole remains the most decisive growth lever for the company. At just under half of our 2025 forecast EBITDA, relatively small improvements in rates or volumes can have a substantial impact. Pending rate cases in Utah and North Carolina look likely to resolve in Enbridge’s favor, further boosting 2026 performance.
After completing the acquisition of three US utilities, Enbridge is a diversified midstream company with many productive avenues to deploy capital. Management’s focus is primarily building out gas transmission assets, with a distant second focus on utility modernization and growth programs. An expansion of the Mainline pipeline will help drive more volumes south to the US.
Enbridge earns a narrow moat due to the efficient scale of its operations. More than 95% of revenue is generated under cost-of-service or rate-regulated activities. Liquids pipelines is the largest segment and dominated by the Mainline, which has substantial regulatory protection that collars returns. Gas transmission possesses both contracts and regulatory protection that result in a stable business. Finally, the gas distribution segment enjoys regulatory protection as a utility.
We assign Enbridge a Standard Capital Allocation Rating. To upgrade our assessment to Exemplary, we would have to see debt ratios come down substantially. The debt load is quite high, and while the business can support it, from a quantitative perspective, the balance sheet carries a moderate risk. Returns to shareholders and investment, the other pillars of our rating, are maintainable and appropriate.
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