Enterprise Products Partners LP

Enterprise Products Partners LP (EPD - Analyst Report) posted record results for the fourth quarter of 2011 on February 1. It was also its 9th consecutive positive earnings surprise.

Estimates have been moving significantly higher for both 2012 and 2013, sending the stock to a Zacks #1 Rank (Strong Buy).

The company also recently increased its quarterly distribution for a remarkable 30th consecutive time. It currently yields a juicy 4.9%.

MLP

Enterprise Products Partners is a Master Limited Partnership (MLP) operating in the natural gas and crude oil pipeline industry. With over 50,000 miles of pipelines and a market cap of $43.5 billion, it is the largest publicly traded energy partnership. It is headquartered in Houston, Texas.

Fourth Quarter Results

Enterprise delivered better than expected results for the fourth quarter of 2011. Earnings per unit came in at 67 cents, crushing the Zacks Consensus Estimate of 56 cents.

The gross operating margin rose 33% year-over-year to $1.1 billion. Meanwhile, operating income surged 80% to $909 million.

Enterprise also reported record distributable cash flow of $816 million for the quarter (excluding $593 million from the sale of assets), which provided an ample 1.5 times coverage of its cash distribution to unitholders.

Growth

Following better than expected Q4 results, analysts raised their estimates for both 2012 and 2013, sending the stock to a Zacks #1 Rank (Strong Buy) stock.

The Zacks Consensus Estimate for 2012 is now $2.44, representing 11% growth over 2011 EPU. The 2013 consensus estimate is currently $2.60, corresponding with 6% growth.

During the fourth quarter, Enterprise completed two large projects: its 5th natural gas liquid (NGL) fractionator at Mont Belvieu, Texas in October and the Haynesville Extension of its Acadian natural gas pipeline system in November. Management expects to see the full benefit of these assets in 2012 through higher distributable cash flow and an improved gross operating margin.

Income

On January 17, the partnership raised its distribution to 62 cents per unit, marking the 30th consecutive quarterly increase. It currently yields a hefty 4.9%.

Going back to the year 2000, Enterprise has raised its distribution at a compound annual rate of 8%.

Valuation

Shares are up more than 9% since I last wrote about EPD on November 18. But valuation still looks reasonable.

The stock trades at 20.6x the 2012 consensus estimate, in-line with the industry median and a discount to its 10-year median of 23.0x.

The Bottom Line

With rising estimates, a 4.9% yield, solid earnings growth potential and reasonable valuation, Enterprise still offers investors attractive total return potential.

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Invesco Ltd. (IVZ - Analyst Report) reported better than expected results for the fourth quarter of 2011. It is a Zacks #2 Rank (Buy). Analysts believe that the company is well-positioned to benefit from retail investors shifting back into equity products, especially given the low interest rate environment over the new few years. In addition to strong earnings growth potential, the company pays a dividend that yields 2.1%. Read the full article.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.

Read the full analyst report on EPD