Enbridge's Take-or-Pay Contracts Support Stable Earnings Growth

Enbridge Inc. ENB is a leading Canada-based midstream company with an extensive crude oil, liquids and gas transportation pipeline network across North America. The midstream company’s business is highly stable, owing to its contractual nature. In fact, 98% of its EBITDA is supported by long-term “take-or-pay” contracts, which shield it from commodity price volatility.

Furthermore, Enbridge’s acquisition of U.S. gas utilities is contributing positively to its EBITDA. The utility business adds another layer of stability to its operations, resulting in predictable earnings supported by regulated rates and long-term agreements. In the third quarter, the company announced that it had reached positive rate settlements for Enbridge Gas North Carolina and Enbridge Gas Utah, effective from November 2025 and January 2026, respectively. This is expected to positively impact ENB’s earnings. Moreover, the growth in data center investments is opening more opportunities for its gas utility business than originally anticipated.

Enbridge’s earnings remain highly stable, mainly due to the “take-or-pay” contracts with its customer base, a significant part of which comprises investment-grade customers, further reducing risks for ENB. The company is well-positioned to deliver predictable earnings and sustainable EBITDA growth with minimal exposure to commodity price volatility.

KMI & WMB Have Stable Business Models

Kinder Morgan Inc. KMI is a leading midstream energy company that operates the biggest natural-gas pipeline system in the United States. It has about 58,500 miles of major pipelines, 7,500 miles of gathering lines and over 700 bcf of gas storage. 

The Williams Companies, Inc. WMB is another leading player in the midstream energy sector, which operates a widespread pipeline system of more than 33,000 miles, including the Transco and Northwest Pipeline systems. These pipeline systems are among the largest natural gas transportation networks in the United States and are anticipated to benefit from the rising natural gas demand.

Both companies generate stable fee-based earnings, resulting in stable cash flows.

ENB’s Price Performance, Valuation & Estimates

Shares of ENB have jumped 5% over the past year compared with the 3.8% improvement of the composite stocks belonging to the industry.

From a valuation standpoint, ENB trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 14.89X. This is above the broader industry average of 13.81X.

The Zacks Consensus Estimate for ENB’s 2025 earnings hasn’t seen any revisions over the past 30 days.

ENB, KMI and WMB currently carry a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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