Despite a coronavirus-hit business environment, Enterprise Products Partners LP EPD has gained 8.6% in the past six months, outperforming the energy sector’s 3.5%. In the past seven days, the stock has witnessed no estimate revision for 2020 and 2021 earnings.
Factors Working in Favor
The partnership, currently carrying Zacks Rank #3 (Hold), has a stable business model and is not significantly exposed to volatility in oil and gas prices. Enterprise generates stable fee-based revenues from the extensive pipeline network that spreads across roughly 50,000 miles, transporting natural gas, natural gas liquids (NGLs), crude oil petrochemicals and refined products. Importantly, the pipelines are connected to key shale plays in the United States and nearly 90% of the refineries in the east of Rockies.
The midstream infrastructure provider also has storage assets that have the capacity to store roughly 260 million barrels of NGL, petrochemical, refined products and crude oil. The assets can also store 14 billion cubic feet of natural gas. Moreover, Enterprise has $5.6 billion of major capital projects under construction that are likely to provide incremental fee-based revenues.
Also, the partnership’s balance sheet has lower debt exposure than the composite stocks belonging to the industry. Its debt-to-capitalization ratio of 0.53 is lower than the industry’s 0.58. In fact, the ratio has persistently been lower than the industry’s over the past few years. Importantly, the partnership’s credit rating is among the highest in the midstream energy space.
It is to be noted that although Enterprise’s long-term business fundamentals look good, the declining production of commodities owing to coronavirus-induced dented energy demand is likely to hurt short-term demand for the partnership’s midstream assets. Notably, lower natural gas pipeline transportation volumes and decreased propylene production volumes are hurting the partnership’s bottom line.
Importantly, although Enterprise has increased its distribution for more than 21 consecutive years, the partnership has been paying lower distribution yield than the composite stocks belonging to the industry.
Stocks to Consider
Some better-ranked players in the energy space include Pioneer Natural Resources Company PXD, Concho Resources Inc. CXO and Murphy Oil Corporation MUR, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Pioneer Natural has seen upward earnings estimate revisions for 2020 in the past 30 days.
Concho is likely to see earnings growth of 21.6% in 2020.
Murphy’s 2020 bottom-line estimates have been revised upward over the past 30 days.
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Enterprise Products Partners L.P. (EPD): Free Stock Analysis Report
Pioneer Natural Resources Company (PXD): Free Stock Analysis Report
Murphy Oil Corporation (MUR): Free Stock Analysis Report
Concho Resources Inc. (CXO): Free Stock Analysis Report
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