Enterprise (EPD) Q4 Earnings Beat on Propylene & Octane Margin
Enterprise Products Partners LP’s EPD fourth-quarter 2023 adjusted earnings per limited partner unit of 72 cents beat the Zacks Consensus Estimate of 66 cents. The bottom line also increased from the year-ago quarter’s level of 65 cents.
Total quarterly revenues of $14.6 billion topped the Zacks Consensus Estimate of $12.8 billion. The top line also improved from $13.7 billion reported in the prior-year quarter.
Strong quarterly results can be attributed to increased operating margin of EPD’s fee-based businesses and improved margins in its propylene and octane enhancement businesses.
Enterprise Products Partners L.P. Price, Consensus and EPS Surprise
Enterprise Products Partners L.P. price-consensus-eps-surprise-chart | Enterprise Products Partners L.P. Quote
Segmental Performance
Pipeline volumes in NGL, crude oil, refined products and petrochemicals totaled 7.8 million barrels per day (bpd), higher than the year-ago quarter’s level of 6.9 million bpd. Natural gas pipeline volumes amounted to 18.7 trillion British thermal units per day (TBtus/d), up from the year-ago quarter’s 17.6 TBtus/d. Also, NGL, crude oil, refined products and petrochemical marine terminal volumes increased to 2.3 million bpd from 1.7 million bpd in the year-ago period.
Gross operating margin at NGL Pipelines & Services increased from $1.3 billion in the year-ago quarter to $1.4 billion. The reported figure topped our estimate of $1.25 billion. This was primarily due to higher average transportation fees and an increase in transportation volumes.
Natural Gas Pipelines and Services’ gross operating margin decreased to $286 million from $315 million in the year-ago quarter. The reported figure, however, came in higher than our estimate of $282 million. The decline was primarily due to lower average sales margin.
Crude Oil Pipelines & Services recorded a gross operating margin of $456 million, up from $418 million recorded in the prior-year quarter, primarily due to an increase in transportation volumes and higher average transportation fees. The reported figure also beat our estimate of $448 million.
The gross operating margin at Petrochemical & Refined Products Services was $439 million, up from $339 million recorded a year ago. The figure, however, missed our estimate of $475 million. The year-over-year increase was driven by higher propylene sales volume and average margins, and higher propylene processing revenues. The positives were partially offset by lower sales volumes and average margins and a decrease in earnings from mark-to-market activity from refined product marketing activities.
Cash Flow
The distributable cash flow totaled $2.1 billion compared with $2 billion in the year-ago period. The same provided a coverage of 1.7X. Enterprise retained $932 million of distributable cash flow in the fourth quarter of 2023. It generated an adjusted free cash flow of $1.2 billion compared $1.4 billion recorded in the year-ago quarter.
Financials
In fourth-quarter 2023, Enterprise’s total capital investment was $1 billion. For the full year, capital investments amounted to $3.3 billion.
As of Dec 31, 2023, outstanding total debt principal was $29 billion and consolidated liquidity amounted to $3.9 billion.
Outlook
For 2024, Enterprise expects growth capital expenditures to be in the range of $3.25-$3.75 billion. The company also projects sustaining capital expenditures for 2024 to be $550 million, which includes planned petrochemical turnarounds. For 2025, EPD expects growth capital expenditures to be $3 billion and sustaining capital expenditures to be $450 million.
Zacks Rank and Key Picks
Currently, EPD carries a Zacks Rank #3 (Hold).
Investors might want to look at some better-ranked stocks in the energy sector, such as Vaalco Energy EGY, Repsol REPYY and First Solar FSLR. While Vaalco and Repsol currently sport a Zacks Rank #1 (Strong Buy) each, First Solar holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Vaalco Energy is an independent energy company involved in upstream operation business with a diversified presence in Africa and Canada. With a large inventory of drilling locations in premium Canadian Acreage, the company’s production outlook seems bright.
Repsol is a global multi-energy company, involved in exploration and production activities as well as refining and marketing petroleum products. The company is also actively involved in transitioning toward cleaner and more sustainable energy solutions. Recently, it announced the expansion of its network of renewable fuel refilling stations in Europe, demonstrating its commitment to a sustainable energy model.
First Solar is a market leader in comprehensive PV solar energy solutions. It specializes in designing, manufacturing and selling solar electric power modules. The company sells its products to project developers, system integrators and renewable energy project operators based out of Europe, particularly Germany. With the rising global trend to shift toward renewable energy solutions, the company’s outlook seems bright.
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