Enterprise Products Partners LP EPD is a leading midstream energy player with low exposure to volume and price risks. The Zacks Consensus Estimate for the partnership’s 2024 earnings per unit is pegged at $2.69, indicating a year-over-year increase of 6.3%.
Factors Working in Favor of EPD
Enterprise Products, which currently carries a Zacks Rank #3 (Hold), has a stable business model and is not significantly exposed to the volatility in oil and gas prices. The company generates stable fee-based revenues from its extensive pipeline network across more than 50,000 miles, transporting natural gas, natural gas liquids, crude oil petrochemicals and refined products. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The midstream infrastructure provider has storage assets that can hold more than 260 million barrels of NGL, petrochemicals, refined products and crude oil. These assets can store 14 billion cubic feet of natural gas. Enterprise Products has $6.9 billion of key approved projects under construction that are likely to provide incremental fee-based revenues.
The partnership’s balance sheet has lower debt exposure than the composite stocks belonging to the industry. The liquidity profile of EPD is impressive. Along with third-quarter 2024 results, the company reported consolidated liquidity of $5.6 billion, which includes unrestricted cash and available borrowing capacity.
Risks to EPD’s Business
Enterprise Products has several assets providing midstream services for many years. This has raised the possibility of investing massive capital in maintaining those infrastructures. Thus, EPD could witness an increase in maintenance or repair expenses.
A slowdown in drilling activities, as upstream players mainly focus on stockholder returns rather than boosting output, is hurting production. This is affecting the demand for transportation and storage of EPD to some extent. Other midstream players that are also being adversely impacted by slowing production growth are The Williams Companies Inc. WMB, Enbridge Inc. ENB and Kinder Morgan, Inc. KMI.
Having ownership and operating interests in pipeline networks spanning 33,000 miles, The Williams Companies transports natural gas from the prolific basins in the United States to the end market.
With a significant portion of its assets being contracted by shippers for the long term, Enbridge’s business model is less exposed to volatility in oil and gas prices. Backed by long-term contracts, ENB’s business model has considerably lower volume risk exposure.
Being a leading midstream service provider, Kinder Morgan’s pipeline and storage assets are secured under long-term take-or-pay contracts. These contracts ensure that shippers pay for the capacity reserved, whether they utilize it or not, which provides a steady stream of revenues. This structure allows Kinder Morgan to generate stable earnings insulated from fluctuations in the volume of natural gas transported, offering significant stability to its bottom line.
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Free: See Our Top Stock And 4 Runners UpWilliams Companies, Inc. (The) (WMB) : Free Stock Analysis Report
Enterprise Products Partners L.P. (EPD) : Free Stock Analysis Report
Enbridge Inc (ENB) : Free Stock Analysis Report
Kinder Morgan, Inc. (KMI) : Free Stock Analysis Report
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