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Pre Q2 Earnings: How Should You Play Enterprise Products (EPD)?
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Enterprise Products Partners LP (EPD - Free Report) is set to report second-quarter 2024 results on Jul 30, 2024, before the opening bell.
The Zacks Consensus Estimate for second-quarter earnings is pegged at 65 cents per share, implying growth of 14% from the year-ago reported number. The estimate was revised downward by one analyst in the past 30 days against no upward movement. The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $13.8 billion, suggesting a 29.7% uptick from the year-ago actuals.
Image Source: Zacks Investment Research
EPD beat the consensus estimate for earnings in two of the trailing four quarters and missed the same twice, with the average surprise being 1.02%. This is depicted in the graph below:
Enterprise Products Partners L.P. Price and EPS Surprise
Our proven model predicts an earnings beat for EPD this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is the case here.
The partnership has an Earnings ESP of +4.25%. This is because the Most Accurate Estimate currently stands at 68 cents per share, higher than the Zacks Consensus Estimate. EPD currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping Q2 Results
Enterprise Products is among the leading providers of midstream services in North America. The partnership is likely to have generated stable fee-based revenues in the June quarter, with its pipeline network spreading across 50,000 miles, transporting natural gas, NGLs, crude oil, refined products and petrochemicals. The partnership is also likely to have generated stable cashflows with a storage capacity of more than 300 million barrels for NGLs, crude oil, petrochemicals and refined products.
The Zacks Consensus Estimate for the gross operating margin from Enterprise Products' NGL Pipelines & Services business segment is pegged at $1,306.7 million, higher than the $1,110 million recorded a year ago. The rising demand for NGL, used in various applications such as home heating, plastic production, and fuel, is likely to have driven increased activity in the NGL Pipelines & Services business unit.
The Zacks Consensus Estimate for the gross operating margin from Enterprise Products' Natural Gas Pipelines & Services business segment is pegged at $316 million, higher than the $238 million recorded in the comparable quarter last year. The rising demand for natural gas as a cleaner-burning fuel is expected to have increased the need for midstream assets to transport and store larger volumes, thereby contributing to the partnership’s Natural Gas Pipelines & Services business segment.
Price Performance & Valuation
EPD's stock has exhibited an upward movement, soaring 18.2% over the past year. In comparison, the energy sector rose 10.2%. Kinder Morgan, Inc. (KMI - Free Report) and Enbridge Inc. (ENB - Free Report) , two other leading midstream energy players, have gained 26.3% and 6.6%, respectively.
One Year Price Chart
Image Source: Zacks Investment Research
EPD is also appearing relatively overvalued, suggesting the potential for price decreases. The partnership's current trailing 12-month enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio is 10.05, which is trading at a premium compared to the broader industry average of 3.19.
Image Source: Zacks Investment Research
Investment Thesis
Enterprise Products has low exposure to volume and commodity price risks. This is due to the fact that its midstream assets are contracted by shippers for the transportation of natural gas, NGLs, crude oil, refined products and petrochemicals over extended periods. Thus, the partnership will continue to generate stable fee-based revenues. EPD will secure additional cashflows since it has $6.9 billion of approved key projects that are under construction.
In addition to increasing its distribution for 25 consecutive years, the partnership boasts a strong credit rating. However, many of EPD's assets have been operational for a significant period and thus necessitate considerable investment in maintenance. As these assets age, they require frequent and often costly upkeep to ensure they continue to function effectively and safely.
Last Word
Although Enterprise Products has a stable business model, investors should wait for a better entry point since the partnership is overvalued compared to the energy sector.
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Pre Q2 Earnings: How Should You Play Enterprise Products (EPD)?
Enterprise Products Partners LP (EPD - Free Report) is set to report second-quarter 2024 results on Jul 30, 2024, before the opening bell.
The Zacks Consensus Estimate for second-quarter earnings is pegged at 65 cents per share, implying growth of 14% from the year-ago reported number. The estimate was revised downward by one analyst in the past 30 days against no upward movement. The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $13.8 billion, suggesting a 29.7% uptick from the year-ago actuals.
EPD beat the consensus estimate for earnings in two of the trailing four quarters and missed the same twice, with the average surprise being 1.02%. This is depicted in the graph below:
Enterprise Products Partners L.P. Price and EPS Surprise
Enterprise Products Partners L.P. price-eps-surprise | Enterprise Products Partners L.P. Quote
Q2 Earnings Whispers
Our proven model predicts an earnings beat for EPD this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is the case here.
The partnership has an Earnings ESP of +4.25%. This is because the Most Accurate Estimate currently stands at 68 cents per share, higher than the Zacks Consensus Estimate. EPD currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping Q2 Results
Enterprise Products is among the leading providers of midstream services in North America. The partnership is likely to have generated stable fee-based revenues in the June quarter, with its pipeline network spreading across 50,000 miles, transporting natural gas, NGLs, crude oil, refined products and petrochemicals. The partnership is also likely to have generated stable cashflows with a storage capacity of more than 300 million barrels for NGLs, crude oil, petrochemicals and refined products.
The Zacks Consensus Estimate for the gross operating margin from Enterprise Products' NGL Pipelines & Services business segment is pegged at $1,306.7 million, higher than the $1,110 million recorded a year ago. The rising demand for NGL, used in various applications such as home heating, plastic production, and fuel, is likely to have driven increased activity in the NGL Pipelines & Services business unit.
The Zacks Consensus Estimate for the gross operating margin from Enterprise Products' Natural Gas Pipelines & Services business segment is pegged at $316 million, higher than the $238 million recorded in the comparable quarter last year. The rising demand for natural gas as a cleaner-burning fuel is expected to have increased the need for midstream assets to transport and store larger volumes, thereby contributing to the partnership’s Natural Gas Pipelines & Services business segment.
Price Performance & Valuation
EPD's stock has exhibited an upward movement, soaring 18.2% over the past year. In comparison, the energy sector rose 10.2%. Kinder Morgan, Inc. (KMI - Free Report) and Enbridge Inc. (ENB - Free Report) , two other leading midstream energy players, have gained 26.3% and 6.6%, respectively.
One Year Price Chart
EPD is also appearing relatively overvalued, suggesting the potential for price decreases. The partnership's current trailing 12-month enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio is 10.05, which is trading at a premium compared to the broader industry average of 3.19.
Investment Thesis
Enterprise Products has low exposure to volume and commodity price risks. This is due to the fact that its midstream assets are contracted by shippers for the transportation of natural gas, NGLs, crude oil, refined products and petrochemicals over extended periods. Thus, the partnership will continue to generate stable fee-based revenues. EPD will secure additional cashflows since it has $6.9 billion of approved key projects that are under construction.
In addition to increasing its distribution for 25 consecutive years, the partnership boasts a strong credit rating. However, many of EPD's assets have been operational for a significant period and thus necessitate considerable investment in maintenance. As these assets age, they require frequent and often costly upkeep to ensure they continue to function effectively and safely.
Last Word
Although Enterprise Products has a stable business model, investors should wait for a better entry point since the partnership is overvalued compared to the energy sector.