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Why Hold Strategy is Apt for Enterprise Products (EPD) Now
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Enterprise Products Partners LP (EPD - Free Report) is a leading midstream energy player with lower exposure to volume and price risks. The Zacks Consensus Estimate for the partnership’s 2023 earnings per share of $2.50 has witnessed three upward revisions in the past 60 days.
Factors Working in Favor
Enterprise Products, currently carrying a Zacks Rank #3 (Hold), has a stable business model and is not significantly exposed to the volatility in oil and gas prices. It generates stable fee-based revenues from its extensive pipeline network that spreads across more than 50,000 miles, transporting natural gas, natural gas liquids (NGLs), crude oil petrochemicals and refined products.
The midstream infrastructure provider also has storage assets that can hold more than 260 million barrels of NGL, petrochemical, refined products and crude oil. These assets can also store 14 billion cubic feet of natural gas. Moreover, Enterprise Products has $5.8 billion of major capital projects under construction that are likely to provide incremental fee-based revenues.
The partnership’s balance sheet has lower debt exposure than the composite stocks belonging to the industry. Its debt-to-capitalization ratio of 0.52 is lower than the industry’s 0.53. In fact, the ratio has persistently been lower than the stocks in the industry in the past few years. The liquidity profile of Enterprise Products is impressive, as it reported consolidated liquidity at $4.1 billion, which incorporates unrestricted cash along with available borrowing capacity.
Risks
Enterprise Products has several assets that have been providing midstream services for many years. This has raised the possibility of investing massive maintenance capital in maintaining those infrastructures. Thus, in the future, Enterprise Products could increase maintenance or repair expenses.
A slowdown in drilling activities, as upstream players mainly focus on stockholder returns rather than boosting output, is hurting production. This is affecting the demand for transportation and storage demand to some extent.
Halliburton is well known for providing products and services to energy companies. Over the past 30 days, HAL has witnessed upward earnings estimate revisions for 2023 and 2024.
PBF Energy is a leading independent refiner in North America. PBF has lower exposure to debt capital than composite stocks belonging to the industry.
Antero Midstream generates stable cashflows, banking on its midstream assets involved in gathering, compression, processing and fractionation activities. The properties are centered around the prolific Appalachian Basin. Over the past 30 days, Antero Midstream has witnessed upward earnings estimate revisions for 2023.
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Why Hold Strategy is Apt for Enterprise Products (EPD) Now
Enterprise Products Partners LP (EPD - Free Report) is a leading midstream energy player with lower exposure to volume and price risks. The Zacks Consensus Estimate for the partnership’s 2023 earnings per share of $2.50 has witnessed three upward revisions in the past 60 days.
Factors Working in Favor
Enterprise Products, currently carrying a Zacks Rank #3 (Hold), has a stable business model and is not significantly exposed to the volatility in oil and gas prices. It generates stable fee-based revenues from its extensive pipeline network that spreads across more than 50,000 miles, transporting natural gas, natural gas liquids (NGLs), crude oil petrochemicals and refined products.
The midstream infrastructure provider also has storage assets that can hold more than 260 million barrels of NGL, petrochemical, refined products and crude oil. These assets can also store 14 billion cubic feet of natural gas. Moreover, Enterprise Products has $5.8 billion of major capital projects under construction that are likely to provide incremental fee-based revenues.
The partnership’s balance sheet has lower debt exposure than the composite stocks belonging to the industry. Its debt-to-capitalization ratio of 0.52 is lower than the industry’s 0.53. In fact, the ratio has persistently been lower than the stocks in the industry in the past few years. The liquidity profile of Enterprise Products is impressive, as it reported consolidated liquidity at $4.1 billion, which incorporates unrestricted cash along with available borrowing capacity.
Risks
Enterprise Products has several assets that have been providing midstream services for many years. This has raised the possibility of investing massive maintenance capital in maintaining those infrastructures. Thus, in the future, Enterprise Products could increase maintenance or repair expenses.
A slowdown in drilling activities, as upstream players mainly focus on stockholder returns rather than boosting output, is hurting production. This is affecting the demand for transportation and storage demand to some extent.
Stocks to Consider
Better-ranked players in the energy space include Halliburton Company (HAL - Free Report) , PBF Energy (PBF - Free Report) and Antero Midstream Corporation (AM - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Halliburton is well known for providing products and services to energy companies. Over the past 30 days, HAL has witnessed upward earnings estimate revisions for 2023 and 2024.
PBF Energy is a leading independent refiner in North America. PBF has lower exposure to debt capital than composite stocks belonging to the industry.
Antero Midstream generates stable cashflows, banking on its midstream assets involved in gathering, compression, processing and fractionation activities. The properties are centered around the prolific Appalachian Basin. Over the past 30 days, Antero Midstream has witnessed upward earnings estimate revisions for 2023.