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Enterprise Products (EPD) Down 3.9% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Enterprise Products Partners (EPD). Shares have lost about 3.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Enterprise Products due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Enterprise Products Q2 Earnings & Revenues Top Estimates

Enterprise Products Partners LP reported second-quarter 2021 adjusted earnings per limited partner unit of 51 cents, which beat the Zacks Consensus Estimate of 50 cents. The bottom line improved from the year-ago quarter’s profit of 47 cents.

Total quarterly revenues of $9,450 million surpassed the Zacks Consensus Estimate of $7,786 million. Also, the top line significantly increased from $5,751 million in the prior-year quarter.

The strong quarterly results can be attributed to higher contributions from the partnership’s natural gas processing business and increased pipeline transportation volumes in Petrochemical & Refined Products Services.

Segmental Performance

Gross operating income at NGL Pipelines & Services increased from $968.1 million in the year-ago quarter to $1,097.6 million. Higher contributions from the partnership’s natural gas processing business and related NGL marketing activities primarily aided the segment.

Natural Gas Pipelines and Services’ gross operating income decreased to $202 million from $208.9 million in the year-ago quarter. The decline was due to lower contributions from the partnership’s Permian Basin natural gas gathering system.

Crude Oil Pipelines & Services recorded a gross operating income of $418.9 million, which decreased from $634.4 million in the prior-year quarter, owing to a drop in fees and transportation volumes from the South Texas crude oil pipeline system.

Gross operating income at Petrochemical & Refined Products Services amounted to $326.3 million compared with $191.5 million a year ago, thanks to higher pipeline transportation volumes.

DCF

Quarterly distribution improved 1.1% year over year to 45 cents per common unit or $1.80 per unit on an annualized basis.

Adjusted distributable cash flow was $1,598.5 million, slightly up from $1,577.3 million a year ago, and provided coverage of 1.6X. Notably, the partnership retained $607 million of distributable cash flow in the June-end quarter.

Financials

In second-quarter 2021, Enterprise Products’ total capital expenditure was $634 million.

As of Jun 30, 2021, its outstanding total debt principal was $28.8 billion. Enterprise Products’ consolidated liquidity amounted to $5.4 billion, which included unrestricted cash on hand and available borrowing capacity under its revolving credit facility.

Outlook

The partnership expects growth capital spending of $1.7 billion and $800 million, respectively, for 2021 and 2022. It reiterates its sustaining capital spending of $440 million for 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Enterprise Products has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Enterprise Products has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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