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Why Is Enterprise Products (EPD) Up 1.8% Since Last Earnings Report?

It has been about a month since the last earnings report for Enterprise Products Partners (EPD). Shares have added about 1.8% in that time frame, outperforming the S&P 500.

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

Enterprise Q2 Earnings & Revenues Beat Estimates

Enterprise reported second-quarter 2022 adjusted earnings per limited partner unit of 64 cents, beating the Zacks Consensus Estimate of 63 cents. The bottom line improved from the year-ago quarter’s 51 cents per share.

Total quarterly revenues of $16,060 million surpassed the Zacks Consensus Estimate of $12,211 million. The top line significantly increased from $9,450 million in the prior-year quarter.

The strong results were driven by higher contributions from the NGL Pipelines & Services business.

Segmental Performance

Pipeline volumes in NGL, crude oil, refined products and petrochemicals were recorded at 6.6 million barrels per day (bpd), slightly higher than the year-ago quarter’s 6.5 million bpd. Natural gas pipeline volumes were 16.8 trillion British thermal units per day (TBtus/d), up from 14.2 TBtus/d a year ago. Also, marine terminal volumes increased to 1.7 million bpd from the year-ago quarter’s 1.6 million bpd.

Gross operating income at NGL Pipelines & Services increased from $1,098 million in the year-ago quarter to $1,327 million, primarily due to higher NGL pipeline transportation volumes.

Natural Gas Pipelines and Services’ gross operating income increased to $229 million from $202 million in the year-ago quarter. The upside was due to an increase in natural gas pipeline transportation volumes.

Crude Oil Pipelines & Services recorded a gross operating income of $407 million, which decreased from $419 million in the prior-year quarter.

Gross operating income at Petrochemical & Refined Products Services amounted to $421 million compared with $326 million a year ago, primarily due to higher butane isomerization volumes. Gross operating margin for the partnership from its propylene business declined significantly.

Cash Flow

Adjusted distributable cash flow was $2,018 million, up from $1,599 million a year ago, and provided coverage of 1.9X. The partnership retained $974 million of distributable cash flow in the June quarter. The partnership generated an adjusted free cash flow of $1,718 million compared with $1,086 million in the year-ago quarter.

Financials

For second-quarter 2022, Enterprise’s total capital investment was $383 million.

As of Jun 30, 2022, its outstanding total debt principal was $29.1 billion. Enterprise’s consolidated liquidity amounted to $4.1 billion. The total liquidity amount included unrestricted cash on hand and available borrowing capacity under its revolving credit facility.

Outlook

For 2022, Enterprise expects its growth capital spending at $1.6 billion. The partnership continues to expect sustaining capital expenditure of $350 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, Enterprise Products has a nice Growth Score of B, 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 quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Enterprise Products has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Enterprise Products is part of the Zacks Oil and Gas - Production Pipeline - MLB industry. Over the past month, Magellan Midstream Partners (MMP), a stock from the same industry, has gained 2.5%. The company reported its results for the quarter ended June 2022 more than a month ago.

Magellan Midstream reported revenues of $788.6 million in the last reported quarter, representing a year-over-year change of +20.7%. EPS of $1.13 for the same period compares with $1.38 a year ago.

Magellan Midstream is expected to post earnings of $1.02 per share for the current quarter, representing a year-over-year change of -6.4%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Magellan Midstream. Also, the stock has a VGM Score of D.


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