We are upbeat about Enterprise Products Partners LP’s EPD prospects and believe it is a promising pick right now.
The partnership currently sports a Zacks Rank #1 (Strong Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or 2 (Buy) offer the best opportunities for investors.
Let’s take a look at the other factors that make this midstream energy player an attractive bet.
Midstream Assets Secure Stable Fee-Based Revenues
Enterprise Products is among the key midstream energy service providers in North America. The partnership’s extensive pipeline networks, which spread across 50,000 miles, transport natural gas, natural gas liquids, oil, refined products and petrochemical. With these midstream infrastructures, the partnership connects producers and consumers, thereby meeting demand for all commodities and refined products in the domestic and international markets.
The partnership’s storage infrastructures, with significant capacity to store natural gas, oil, petrochemicals and refined products, are connected to most of the key shale plays in America.
Enterprise Products’ midstream asset base also comprises 23 fractionators and 28 processing units for natural gas. All of the ethylene crackers in the United States have access to the partnership’s fractionators and associated properties.
Needless to say, the value chain of these integrated midstream operations secures the partnership with a stable flow of fee-based revenues.
Growth Projects to Reward Unitholders
Since the initial public offering (IPO) in 1998, the partnership has accomplished $38 billion of organic growth projects. Enterprise Products also completed major acquisitions — worth $26 billion — over the aforesaid time frame.
Moreover, Enterprise Products has $6 billion backlog of growth projects, securing additional fee-based revenues in the years to come.
More Upside Potential
On the basis of the trailing 12-month enterprise value-to-earnings before interest, tax, depreciation, and amortization (EV/EBITDA) ratio, which is a commonly used multiple for valuing oil and gas stocks, we see that the stock is currently trading at 12.37X.
Over the past five years, the stock has traded as high as 19.6X, as low as 12.29X and at the median of 15.41X, as the chart below shows.
The partnership’s current multiple is lower than the median level and significantly below the five-year high mark, reflecting substantial upside potential.
Other Stocks to Consider
Other prospective players in the energy space are TC PipeLines, LP TCP, Eni SpA E and Unit Corporation UNT. All the stocks sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
TC PipeLines beat the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 15.6%.
Eni managed to beat the Zacks Consensus Estimate in three of the past four quarters.
Unit Corporation surpassed the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 21.3%.
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