Enbridge Beats As EBITDA Growth Accelerates, But Equity-Funded Liquids Pivot, 5.1x Leverage And A Dipping Backlog Weigh On The Setup

Enbridge (TSX: ENB) beat expectations in the third quarter, reporting earnings of $0.39 per share against a $0.36 consensus, an 8.3% surprise, with earnings up 18.2% year over year. Revenue of $15.062 billion topped the $10.32 billion estimate by 46.0% and grew 41.7%. For a pipeline and utility business, revenue is a weak gauge of performance, and the more meaningful signal is that adjusted EBITDA growth accelerated for a third straight quarter. Management reaffirmed 2026 guidance. The central tension is that the operating trend is improving while the balance sheet and capital plan are getting heavier. Enbridge raised $3.0 billion of common equity to fund a pivot toward acquired liquids growth, leverage is stuck at 5.1x, and the stock has fallen 13.1% since the last report.

The quality of the beat holds up better than the GAAP figures suggest. In its own Canadian-dollar reporting, Enbridge posted GAAP EPS of C$0.59, nearly double the C$0.30 a year ago, but that jump came mainly from non-cash, unrealized derivative swings. Adjusted EPS of C$0.49, up from C$0.46, is the cleaner read. These company-reported figures are on a different basis from the normalized EPS above. Adjusted EBITDA rose C$167 million to C$4.4 billion, and distributable cash flow increased C$123 million to C$2.7 billion, helped by lower maintenance capital from cost-saving initiatives. Still, higher depreciation and interest expense absorbed much of the EBITDA gain. Year-to-date adjusted EPS of C$2.10 remains below last year's C$2.14.

The gains are concentrated in the gas businesses, and the call underscored that split:

• **Gas Transmission:** adjusted EBITDA rose C$165 million on the East Tennessee and Texas Eastern rate outcomes and higher allowance for equity funds used during construction.
• **Gas Distribution and Storage:** EBITDA increased C$105 million on rate cases in Utah and North Carolina plus customer growth in Ontario.
• **Liquids Pipelines:** the largest segment fell C$101 million on lower Mainline volumes, reduced Line 9 tolls and underutilized Flanagan South contracts to the Gulf Coast.

Adjusted EBITDA growth has stepped up from flat in Q1 to +C$130 million in Q2 and +C$167 million now. That trajectory supports management's case, but the crude franchise is not yet contributing.

That helps explain the strategic turn. Enbridge agreed to buy Tallgrass's crude business for US$2.55 billion, adding a Rockies-to-Cushing corridor and the take-or-pay PXP2 expansion. It also closed the US$0.6 billion Salt Creek Midstream deal, creating a Permian wellhead-to-water chain through Gray Oak and Ingleside. Other forward catalysts include:

• the sanctioned Long Lake oil sands lateral;
• a closed Flanagan South open season, with a Southern Access Extension decision expected by the next call;
• a West Texas Express gas egress open season;
• management's comment that its 1 million bbl/d Western Canadian supply growth outlook for 2035 is "probably too low."

On the funding side, the KKR/Apollo Westcoast investment closed and adds roughly C$2.7 billion of capacity beyond the C$10–11 billion annual base. The Ohio rate stipulation, if approved, would add about US$145 million of annual revenue requirement from March 2027.

Bears have legitimate ammunition. Specific concerns include:

• **Backlog:** the secured backlog slipped to C$38 billion from C$41 billion in Q2. Management attributes this mainly to C$3 billion of projects entering service, but it still shrank.
• **Leverage:** debt-to-EBITDA held at 5.1x for a second quarter, above the target range and up from 4.8x at the end of 2025. Management attributes this partly to currency translation and expects a similar level in Q4.
• **Dilution:** the 44.7 million-share equity raise dilutes holders before acquired EBITDA arrives.
• **Pending items:** the Mainline MLO2 expansion remains deferred on Canadian policy, and the B.C. toll settlement expires at year-end with no replacement expected until early 2027.
• **Leadership:** CEO Greg Ebel retires in January, handing off to Michele Harradence.

Investor sentiment improved modestly, rising from 0.118 to 0.174, and remains mildly positive rather than enthusiastic. Price action has been far less forgiving. Shares at $48.11 are 13.1% below the open following the July report and 13.5% beneath the $55.60 quarterly high set that day. They sit 7.9% under the 200-day moving average, and the stock is only 5.8% above its October 5 low of $45.49. That decline coincided with the acquisition announcements and the bought-deal equity offering, suggesting the market has been pricing dilution and leverage more heavily than the improving EBITDA cadence.

The bottom line is that Enbridge delivered a clean beat, reaffirmed guidance for what management says would be its 21st consecutive year on target, and showed accelerating EBITDA growth driven by regulated gas. The investment setup, however, now hinges on execution of an equity-funded liquids expansion while leverage sits above target and leadership changes hands. Until acquired EBITDA annualizes and the Mainline volume drag eases, the stock's discount to its 200-day average reflects a market that wants proof the growth is accretive.

Read our earnings preview for Enbridge Inc.: https://www.earningswhispers.com/article/ENB/22484

This earnings review was originally published on Earnings Whispers.

This article is for informational purposes only and is not investment advice. Earnings Whispers and its staff may hold positions in the securities mentioned. It is AI-assisted, based on proprietary Earnings Whispers data and company reports, and edited by Earnings Whispers staff.