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How to Play Enterprise Products Stock After Q3 Earnings?
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Key Takeaways
Enterprise Products' Q3 earnings and revenues missed estimates and declined year over year.
The partnership's dependence on the Permian basin exposes it to oil price and demand risks.
Higher leverage from large capital projects leaves EPD vulnerable to operational uncertainties.
On Oct 30, Enterprise Products Partners LP (EPD - Free Report) announced third-quarter 2025 earnings that fell short of expectations. Moreover, the leading midstream energy player’s broader business outlook remains gloomy. Before exploring the factors behind this bleak outlook, let's first examine the third-quarter results.
Image Source: Zacks Investment Research
EPD’s Q3 Earnings Snapshot
Enterprise Products’ adjusted earnings per limited partner unit of 61 cents missed the Zacks Consensus Estimate of 67 cents. Moreover, the bottom line decreased from the year-ago quarter’s 65 cents.
Total quarterly revenues of $12.02 billion missed the Zacks Consensus Estimate of $12.6 billion. The top line also declined from $13.8 billion reported in the prior-year quarter.
Kinder Morgan Inc. (KMI - Free Report) and Enbridge Inc. (ENB - Free Report) are two other prominent midstream energy companies. Kinder Morgan has already released third-quarter earnings, while Enbridge is yet to report.
Permian Concentration Risk of EPD
Enterprise Products, on its September quarter earnings call, highlighted that its growth is significantly dependent on the Permian – the most prolific basin in the United States. The partnership emphasized that new processing plants, pipelines and gathering systems are highly connected to the basin, creating Permian concentration risks.
Notably, the U.S. Energy Information Administration (“EIA”) projected the West Texas Intermediate (WTI) spot average price at $65 per barrel in 2025 and $48.50 per barrel in 2026, significantly lower than $76.60 per barrel in 2024. EIA expects the rising global inventories to hurt the pricing environment of the commodity. Thus, the possibility of softening oil prices is making the outlook for the exploration and production business gloomy, which in turn highlights the probability of weak future demand for EPD’s midstream assets in the oil-rich Permian.
EPD’s Considerable Debt Exposure Could Restrict Flexibility
On its third-quarter call, EPD highlighted that its consolidated leverage ratio of 3.3 exceeds its target range of 2.75 to 3.25. This is because the partnership has invested heavily in large ongoing midstream projects, from which earnings have yet to be realized, resulting in a higher debt profile. Therefore, Enterprise Products remains highly vulnerable to uncertainties if new projects are not ramped up on time.
What Should Investors Do With the Stock?
The partnership is willing to invest $4.5 billion in capital this year. The significant capital expenditure may put pressure on cash flows and leverage profile.
Following all the negative developments, Enterprise Products’ price chart is not impressive. Year to date, the stock gained a marginal 5.2%, underperforming Enbridge’s 14.9% gain. Kinder Morgan, however, declined 1.3% over the same time frame.
Image Source: Zacks Investment Research
Coming to the valuation story, EPD is undervalued. This is reflected by the fact that it trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 10.08X, which is below the broader industry average of 10.34X. KMI and ENB trade at a trailing 12-month EV/EBITDA of 13.30X and 15.19X, respectively.
Image: Bigstock
How to Play Enterprise Products Stock After Q3 Earnings?
Key Takeaways
On Oct 30, Enterprise Products Partners LP (EPD - Free Report) announced third-quarter 2025 earnings that fell short of expectations. Moreover, the leading midstream energy player’s broader business outlook remains gloomy. Before exploring the factors behind this bleak outlook, let's first examine the third-quarter results.
EPD’s Q3 Earnings Snapshot
Enterprise Products’ adjusted earnings per limited partner unit of 61 cents missed the Zacks Consensus Estimate of 67 cents. Moreover, the bottom line decreased from the year-ago quarter’s 65 cents.
Total quarterly revenues of $12.02 billion missed the Zacks Consensus Estimate of $12.6 billion. The top line also declined from $13.8 billion reported in the prior-year quarter.
Kinder Morgan Inc. (KMI - Free Report) and Enbridge Inc. (ENB - Free Report) are two other prominent midstream energy companies. Kinder Morgan has already released third-quarter earnings, while Enbridge is yet to report.
Permian Concentration Risk of EPD
Enterprise Products, on its September quarter earnings call, highlighted that its growth is significantly dependent on the Permian – the most prolific basin in the United States. The partnership emphasized that new processing plants, pipelines and gathering systems are highly connected to the basin, creating Permian concentration risks.
Notably, the U.S. Energy Information Administration (“EIA”) projected the West Texas Intermediate (WTI) spot average price at $65 per barrel in 2025 and $48.50 per barrel in 2026, significantly lower than $76.60 per barrel in 2024. EIA expects the rising global inventories to hurt the pricing environment of the commodity. Thus, the possibility of softening oil prices is making the outlook for the exploration and production business gloomy, which in turn highlights the probability of weak future demand for EPD’s midstream assets in the oil-rich Permian.
EPD’s Considerable Debt Exposure Could Restrict Flexibility
On its third-quarter call, EPD highlighted that its consolidated leverage ratio of 3.3 exceeds its target range of 2.75 to 3.25. This is because the partnership has invested heavily in large ongoing midstream projects, from which earnings have yet to be realized, resulting in a higher debt profile. Therefore, Enterprise Products remains highly vulnerable to uncertainties if new projects are not ramped up on time.
What Should Investors Do With the Stock?
The partnership is willing to invest $4.5 billion in capital this year. The significant capital expenditure may put pressure on cash flows and leverage profile.
Following all the negative developments, Enterprise Products’ price chart is not impressive. Year to date, the stock gained a marginal 5.2%, underperforming Enbridge’s 14.9% gain. Kinder Morgan, however, declined 1.3% over the same time frame.
Coming to the valuation story, EPD is undervalued. This is reflected by the fact that it trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 10.08X, which is below the broader industry average of 10.34X. KMI and ENB trade at a trailing 12-month EV/EBITDA of 13.30X and 15.19X, respectively.
Notably, although EPD isn't expensive now, investors should stay away from EPD, which currently carries a Zacks Rank #4 (Sell), since the partnership’s overall business outlook looks gloomy. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.