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Why Is Enterprise Products (EPD) Up 20.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Enterprise Products Partners (EPD - Free Report) . Shares have added about 20.1% 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 Products Q3 Earnings Meet Estimates

Enterprise Products reported third-quarter 2020 adjusted earnings per limited partner unit of 48 cents, in line with the Zacks Consensus Estimate. The bottom line, moreover, improved from the year-ago quarter’s 46 cents per unit.

Revenues declined to $6,922 million from $7,964.1 million in the prior-year quarter. However, the top line beat the consensus estimate of $6,529 million.

Increased transportation volumes in Petrochemical & Refined Products Services, and higher fee-based volumes from the Permian Basin at the partnership’s gas processing plants aided the bottom line. The positives were partially offset by lower natural gas pipeline transportation volumes, and crude oil transportation and marine terminal volumes.

Segmental Performance

Gross operating income at NGL Pipelines & Services increased from $1,008.3 million in the year-ago quarter to $1,028.1 million on higher NGL production volumes. Moreover, higher fee-based volumes from the Permian Basin at the partnership’s gas processing plants benefited the segment.

Natural Gas Pipelines and Services’ gross operating income decreased to $208.4 million from $258.5 million in the year-ago quarter. The downside is owing to lower natural gas pipeline transportation volumes.

Crude Oil Pipelines & Services recorded gross operating income of $481.8 million, which decreased from $496.2 million in the prior-year quarter owing to a decrease in crude oil transportation and marine terminal volumes.

Gross operating income at Petrochemical & Refined Products Services amounted to $315 million compared with $288.4 million a year ago. The improved performance was owing to an increase in segment pipeline transportation volumes.

DCF

Quarterly distribution improved 0.6% year over year to 44.50 cents per common unit or $1.78 per unit on an annualized basis.

Adjusted distributable cash flow was $1,647 million, up from $1,639.5 million a year ago, and provided coverage of 1.7x. Notably, the partnership retained $669 million of distributable cash flow in the third quarter.

Financials

For the quarter, Enterprise Products’ total capital expenditure was $705 million.

As of Sep 30, 2020, its outstanding total debt principal was $30.1 billion. Enterprise Products’ consolidated liquidity amounted to $6 billion, which included unrestricted cash on hand of $1 billion and available borrowing capacity of $5 billion.

Outlook

The partnership foresees investment of $2.9 billion for the growth capital project for 2020. It expects its sustaining capital expenditures for 2020 to reach $300 million. Enterprise Products lowered growth capital investment projections for 2021 and 2022 to $1.6 billion and $800 million, respectively.

The partnership expects energy demand to rise in the long run. Demand growth for cleaner energy sources will likely be driven by the developing countries. As such, crude prices are expected to start increasing in the second half of next year.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

Currently, Enterprise Products has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

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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