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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 has witnessed no revisions in the past seven 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 has storage assets that can hold more than 260 million barrels of NGL, petrochemical, refined products and crude oil. These assets can store 14 billion cubic feet of natural gas. Enterprise Products has $4.1 billion of major capital projects under construction, which 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 0.51 is lower than the industry’s 0.53. Notably, 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 of $4 billion, which incorporates unrestricted cash and 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 capital in maintaining those infrastructures. Thus, in the future, Enterprise Products could witness an increase in 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.
Through its ownership interests in onshore oil and natural gas properties in the United States, Evolution Petroleum is touted as a key independent energy player.
Oceaneering International is well placed on improving oil prices since it is a leading provider of engineered services and products and robotic solutions to the energy companies working offshore. Higher oil price is supporting increased upstream activities, which, in turn, will improve demand for Oceaneering’s drilling and completions support services.
Murphy, a leading retailer of gasoline and convenience merchandise, has a solid business model.
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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 has witnessed no revisions in the past seven 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 has storage assets that can hold more than 260 million barrels of NGL, petrochemical, refined products and crude oil. These assets can store 14 billion cubic feet of natural gas. Enterprise Products has $4.1 billion of major capital projects under construction, which 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 0.51 is lower than the industry’s 0.53. Notably, 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 of $4 billion, which incorporates unrestricted cash and 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 capital in maintaining those infrastructures. Thus, in the future, Enterprise Products could witness an increase in 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 Evolution Petroleum Corporation (EPM - Free Report) , Oceaneering International, Inc. (OII - Free Report) and Murphy USA (MUSA - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Through its ownership interests in onshore oil and natural gas properties in the United States, Evolution Petroleum is touted as a key independent energy player.
Oceaneering International is well placed on improving oil prices since it is a leading provider of engineered services and products and robotic solutions to the energy companies working offshore. Higher oil price is supporting increased upstream activities, which, in turn, will improve demand for Oceaneering’s drilling and completions support services.
Murphy, a leading retailer of gasoline and convenience merchandise, has a solid business model.