Watch Out: Barbarians At The Gate For Enbridge Energy Partners (EEP)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Enbridge Energy Partners ( EEP) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Enbridge Energy Partners as such a stock due to the following factors:

  • EEP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $27.6 million.
  • EEP has traded 764,813 shares today.
  • EEP traded in a range 602% of the normal price range with a price range of $2.96.
  • EEP traded above its daily resistance level (quality: 52 days, meaning that the stock is crossing a resistance level set by the last 52 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on EEP:

Enbridge Energy Partners, L.P. owns and operates crude oil and liquid petroleum transportation and storage assets; and natural gas gathering, treating, processing, transportation, and marketing assets in the United States. It operates through three segments: Liquids, Natural Gas, and Marketing. The stock currently has a dividend yield of 8%. Currently there are 2 analysts that rate Enbridge Energy Partners a buy, 2 analysts rate it a sell, and 7 rate it a hold.

The average volume for Enbridge Energy Partners has been 851,700 shares per day over the past 30 days. Enbridge Energy has a market cap of $7.1 billion and is part of the basic materials sector and energy industry. The stock has a beta of 0.61 and a short float of 2.2% with 4.77 days to cover. Shares are down 4.8% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Enbridge Energy Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.9%. Since the same quarter one year prior, revenues rose by 10.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 89.13% to $269.90 million when compared to the same quarter last year. In addition, ENBRIDGE ENERGY PRTNRS -LP has also vastly surpassed the industry average cash flow growth rate of -23.15%.
  • ENBRIDGE ENERGY PRTNRS -LP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ENBRIDGE ENERGY PRTNRS -LP swung to a loss, reporting -$0.38 versus $1.25 in the prior year. This year, the market expects an improvement in earnings ($0.95 versus -$0.38).
  • The gross profit margin for ENBRIDGE ENERGY PRTNRS -LP is currently lower than what is desirable, coming in at 27.30%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.46% trails that of the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 83.2% when compared to the same quarter one year ago, falling from $54.30 million to $9.10 million.

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