Image source: Spectra Energy via Flickr.

Spectra Energy (SE) has been extremely busy these past few years. Since 2013, the company has brought close to $10 billion in new assets on line, with another $9 billion already in the works for the next few years. It can be very easy to get enamored with these growth numbers and not remember the other aspects that will make Spectra a good investment over the long term. When Spectra reports its earnings on Aug. 3 before the market opens, there are two things that you should look for to see if the company remains on track.

Projects remain on track?

Spectra Energy, along with Spectra Energy Partners (SEP), has a very large suite of projects currently under construction. What is rather surprising about its project pipeline, though, is that the company had no plans to bring any major projects on line in the first half of 2016. The only project that is expected to start up this quarter is on its Ozark gas transmission lines, but that is worth just $50 million of the more than $8 billion in projects that are currently underway. 

Image source: Spectra Energy investor presentation.

Based on this, there are two things to keep in mind when the company reports earnings. The first is that you shouldn't be surprised if results from this quarter and the prior one are not that much different. There will be some variability related to seasonal gas demand, but there won't be a considerable contribution from new projects. 

The other is to see if there is any update on the projects that are slated to come on line in the second half of the year. The company just won an award to build a $1.5 billion gas transmission pipeline that will export to Mexico, and depending on how quickly it wants to bring this project to fruition, the timing could shift around some of the completion dates for its existing profile.

A distribution coverage slip?

Last quarter, Spectra posted a very impressive distribution coverage ratio of 1.8. That is extremely high for pipeline companies and even would suggest that the company is hoarding cash. In reality, though, this is actually by design for another reason. 

It all goes back to the seasonal variability in natural gas demand. A large part of the company's profits come from natural gas transmission and distribution to residential and commercial customers. For the most part, this kind of business will see its highest levels of demand in the winter months. As a result, Spectra's results are pretty lumpy from quarter to quarter. In the second quarter, it's not uncommon for the company to see lower levels of distributable cash coming in the door. So don't be completely surprised if the company's distribution coverage ratio slips a bit in this coming quarter. 

The important thing to keep in mind is the company's distribution coverage ratio on an annual basis. Management expects its coverage ratio to come in at 1.2 for the year. Chances are, we won't have a great feel as to whether the company is on track to meet that goal by the end of the quarter, but it would be worth seeing if management says anything about either expecting to meet its goal or revising its outlook for the year. 

What a Fool believes

Spectra Energy (and Spectra Energy Partners) has done a bang-up job of balancing the need to grow, pay its shareholders, and keep its financial house in order while so many other master limited partnerships have been forced to cut payouts or revise their growth plans. According to its previous quarters results, the company appeared to remain on track to meet its goal for growth between now and 2018. 

As this quarter comes, investors should be on the lookout to see if the company has altered these plans at all and why management decided to do so. Also, chances are we will see its financial results slip compared to last quarter, but that isn't anything out of the ordinary for the company, and it shouldn't alter the way you think about this stock long term.