Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Spectra Energy Corp. Earnings: Is This Dividend Stock a Natural Gas Winner?

Source: Spectra Energy Corp. 

Spectra Energy Corp. (NYSE: SE  ) and its master limited partnership Spectra Energy Partners, LP (NYSE: SEP  ) reported Q4 earnings today, and the two stocks continue to head higher. But with natural gas prices on the rise, are these companies headed for tough times? Here's what you need to know.

The numbers
Spectra Energy Corp. exceeded expectations on both its top and bottom line. Sales came in at $1.56 billion, a solid $80 million above analyst estimates and 16% higher than last year. On the bottom line, Spectra Energy Corp. pulled in adjusted earnings per share (EPS) of $0.41, $0.03 above estimates and $0.09 above Q3 2012 earnings.  

Master limited partnership Spectra Energy Partners, LP also recorded growth, with Q4 EBITDA hitting $368 million. Spectra Energy Corp. finalized its dropdown of U.S. transmission, storage, and liquid assets to Spectra Energy Partners, LP this past quarter, so year-over-year comparisons will be increasingly meaningful from now on. In Q4 2012, Spectra Energy Partners, LP, pulled in $316 million of EBITDA. 

For a bit of perspective, here's how Spectra Energy Corp.'s overall sales and adjusted EPS have fared over the past three years.

SE Revenue (Annual) Chart

SE Revenue (Annual) data by YCharts.

While Spectra Energy Partners, LP sales have soared, that's simply evidence of more asset dropdowns. With solid but unremarkable sales elsewhere, you've got to look beyond numbers to know why these shares have soared over the past five years.

SE Chart

SE data by YCharts.

Natural gas. Natural gas. Natural gas.
Spectra Energy didn't just invest in natural gas early on -- it came into existence neck-deep in the stuff as a 2007 Duke Energy Corporation (NYSE: DUK  ) spinoff. And while that might've meant a leaner, meaner balance sheet for Duke Energy Corporation heading into the global financial crisis, few would argue that Spectra Energy got the better end of the division deal. Duke Energy Corporation has been undergoing a massive $9 modernization project, a large portion of which involves retiring costly and cumbersome coal plants in favor of new natural gas facilities. Check out the video below for visual proof of Duke Energy Corporation's literal self-destruction.

Source: Duke Energy Corporation 

Mover and shaker
But natural gas alone isn't enough to explain Spectra Energy's soaring shares. Even if Duke Energy Corporation converted all of its power plants to natural gas tomorrow, it wouldn't have what Spectra Energy has. The company's true competitive moat is its focus on transmission and infrastructure. While rising natural gas prices put margin squeezes on power producers and pit other energies like nuclear back into the battle, Spectra Energy can sit back and continue to enjoy the sweet cash flow from midstream operations.

The company allocated $6 billion to capital expenditures in 2013 and plans to add on another $7 billion in the coming year. Overall, it's got $25 billion in near- to mid-term growth projects lined up, meaning substantial growth opportunity as it continues to pull profits from current operations. 

Source: NextEra Energy.

For example, the company is partnering up with NextEra Energy  (NYSE: NEE  ) to bring Florida its third major natural gas pipeline. Officials continue to push Spectra's and NextEra Energy's project through the regulatory pipeline, and the companies expect the project to be up and running to meet Floridian's growing demand by mid-2017. 

Room to grow?
In the words of Spectra Energy President and CEO Greg Ebel, "On virtually all fronts, 2013 was a very strong year for Spectra Energy." Ebel's right, and his company's stock performance continues to show it. Spectra Energy is increasingly solidifying its role in America's energy infrastructure, and the company should continue to excel in the years to come.

Three more natural gas winners
Spectra Energy isn't the only company set to soar. Record natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2822742, ~/Articles/ArticleHandler.aspx, 9/2/2015 6:44:26 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Justin Loiseau

Energy and Macroeconomic Specialist keeping investors up to date with macro news, utilities, and good companies doing good things.

Today's Market

updated 9 hours ago Sponsored by:
DOW 16,058.35 -469.68 -2.84%
S&P 500 1,913.85 -58.33 -2.96%
NASD 4,636.11 -140.40 -2.94%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/1/2015 4:05 PM
SE $27.92 Down -1.15 -3.96%
Spectra Energy CAPS Rating: *****
SEP $49.83 Down -1.11 -2.18%
Spectra Energy Par… CAPS Rating: *****
DUK $69.05 Down -1.86 -2.62%
Duke Energy Corp CAPS Rating: ****
NEE $95.35 Down -3.06 -3.11%
NextEra Energy, In… CAPS Rating: *****