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EPD's Inflation-Protected Contracts: Key Takeaways for Investors

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Key Takeaways

  • EPD's network and storage assets generate stable cash flows across market environments.
  • Nearly 90% of long-term contracts include inflation-linked fee increases for added protection.
  • $5.1B in key projects, including the Bahia pipeline and fractionator 14, are boosting cash flow potential.

Enterprise Products Partners LP’s (EPD - Free Report) pipeline network spans more than 50,000 miles, transporting oil, natural gas and other commodities. The partnership also has more than 300 million barrels of liquid storage capacity, thereby generating stable cash flows.

Importantly, the business model of Enterprise Productsis inflation-protected because almost 90% of its long-term contracts include a provision for increasing fees when the business environment becomes inflationary. This is how the midstream energy player is able to safeguard its cash flow generation in all business scenarios.

EPD also expects incremental cash flows from its $5.1 billion worth of key capital projects, comprising the Bahia pipeline, fractionator 14 and others, which are either in service or set to come online. Thus, with the partnership’s business model being mostly inflation-protected and likely to generate incremental cash flows from project backlogs, the stock could be attractive for income seekers.

KMI & ENB Also Have Stable Business Models

Kinder Morgan Inc. (KMI - Free Report) and Enbridge Inc. (ENB - Free Report) are two other midstream energy majors. By the very nature of their businesses, both KMI and ENB also have predictable cash flows. This is because KMI and ENB generate stable fee-based earnings from their respective midstream assets.

EPD’s Price Performance, Valuation & Estimates

Units of Enterprise Products have jumped 7.2% over the past year against the 5.6% decline of the composite stocks belonging to the industry.

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From a valuation standpoint, EPD trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 10.52X. This is below the broader industry average of 10.56X.

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The Zacks Consensus Estimate for EPD’s 2025 earnings has seen downward revisions over the past 30 days.

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Enterprise Products currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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Enterprise Products Partners L.P. (EPD) - free report >>

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