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Why Hold Strategy is Apt for Enterprise Products (EPD) Now
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Enterprise Products Partners LP (EPD - Free Report) is a leading midstream energy player with lower exposure to volume and price risks. The Zacks Consensus Estimate for the partnership’s 2023 earnings per share has witnessed upward revisions in the past 30 days.
Factors Working in Favor
Enterprise Products, currently carrying a Zacks Rank #3 (Hold), has a stable business model and is not significantly exposed to the volatility in oil and gas prices. It generates stable fee-based revenues from its extensive pipeline network that spreads across more than 50,000 miles, transporting natural gas, natural gas liquids (NGLs), crude oil petrochemicals and refined products.
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 $4.1 billion of major capital projects under construction, which 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. Its debt-to-capitalization ratio of 0.51 is lower than the industry’s 0.53. Notably, the ratio has persistently been lower than the stocks in the industry in the past few years. The liquidity profile of Enterprise Products is impressive, as it reported consolidated liquidity of $4 billion, which incorporates unrestricted cash and available borrowing capacity.
Risks
Enterprise Products has several assets that have been providing midstream services for many years. This has raised the possibility of investing massive capital in maintaining those infrastructures. Thus, in the future, Enterprise Products could witness an increase in maintenance or repair expenses.
As upstream players mainly focus on stockholder returns rather than boosting output, a slowdown in drilling activities is hurting production. This is affecting the demand for transportation and storage demand to some extent.
Stocks to Consider
Better-ranked players in the energy space include Magellan Midstream Partners LP , Profire Energy, Inc. (PFIE - Free Report) and Helix Energy Solutions Group, Inc. (HLX - Free Report) . While Magellan Midstream and Profire Energy carry a Zacks Rank #2 (Buy), Helix Energy sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Magellan Midstream has extensive petroleum midstream infrastructures that will be needed in the United States for decades to come. The business model of the partnership is resilient to commodity price fluctuations and derives stable fee-based revenues.
Profire Energy is mainly focused on the oil and gas industry’s upstream, midstream and downstream transmission segments. PFIE has boosted that its legacy business is doing extremely well, thanks to the resumption of maintenance work of exploration and production players.
Helix Energy is a leading player and is well-poised to grow in the favorable crude pricing environment since it primarily provides specialty services to the offshore energy industry.
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Why Hold Strategy is Apt for Enterprise Products (EPD) Now
Enterprise Products Partners LP (EPD - Free Report) is a leading midstream energy player with lower exposure to volume and price risks. The Zacks Consensus Estimate for the partnership’s 2023 earnings per share has witnessed upward revisions in the past 30 days.
Factors Working in Favor
Enterprise Products, currently carrying a Zacks Rank #3 (Hold), has a stable business model and is not significantly exposed to the volatility in oil and gas prices. It generates stable fee-based revenues from its extensive pipeline network that spreads across more than 50,000 miles, transporting natural gas, natural gas liquids (NGLs), crude oil petrochemicals and refined products.
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 $4.1 billion of major capital projects under construction, which 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. Its debt-to-capitalization ratio of 0.51 is lower than the industry’s 0.53. Notably, the ratio has persistently been lower than the stocks in the industry in the past few years. The liquidity profile of Enterprise Products is impressive, as it reported consolidated liquidity of $4 billion, which incorporates unrestricted cash and available borrowing capacity.
Risks
Enterprise Products has several assets that have been providing midstream services for many years. This has raised the possibility of investing massive capital in maintaining those infrastructures. Thus, in the future, Enterprise Products could witness an increase in maintenance or repair expenses.
As upstream players mainly focus on stockholder returns rather than boosting output, a slowdown in drilling activities is hurting production. This is affecting the demand for transportation and storage demand to some extent.
Stocks to Consider
Better-ranked players in the energy space include Magellan Midstream Partners LP , Profire Energy, Inc. (PFIE - Free Report) and Helix Energy Solutions Group, Inc. (HLX - Free Report) . While Magellan Midstream and Profire Energy carry a Zacks Rank #2 (Buy), Helix Energy sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Magellan Midstream has extensive petroleum midstream infrastructures that will be needed in the United States for decades to come. The business model of the partnership is resilient to commodity price fluctuations and derives stable fee-based revenues.
Profire Energy is mainly focused on the oil and gas industry’s upstream, midstream and downstream transmission segments. PFIE has boosted that its legacy business is doing extremely well, thanks to the resumption of maintenance work of exploration and production players.
Helix Energy is a leading player and is well-poised to grow in the favorable crude pricing environment since it primarily provides specialty services to the offshore energy industry.