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Enterprise Products' Q4 Earnings on Deck: Time to Buy the Stock?

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Key Takeaways

  • EPD is set to report Q4 earnings of 70 cents per share, suggesting a 5.4% y/y dip.
  • Gross margins in both crude oil and NGL pipeline segments are forecast to decline y/y.
  • EPD continues to generate stable fee-based revenues and boost unitholder returns via buybacks.

Enterprise Products Partners LP (EPD - Free Report) is set to report fourth-quarter 2025 results on Feb. 3, before the opening bell.

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 70 cents per share, implying a 5.4% decline from the year-ago reported number. There has been one downward earnings estimate revision over the past seven days. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $13.14 billion, suggesting a 7.5% fall from the year-ago actual.

 

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EPD's Earnings Surprise History

EPD beat the consensus estimate for earnings in two of the trailing four quarters and missed the same twice, the negative average surprise being 1.86%. This is depicted in the graph below: 

EPD’s Q4 Earnings Whispers

Our proven model does not predict an earnings beat for EPD this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is not the case here.

The partnership has an Earnings ESP of -1.20% and it currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Factors to Note

Enterprise Products is among the leading providers of midstream services in North America. The partnership is likely to have generated stable fee-based revenues in the December-end quarter, with its pipeline network spanning more than 50,000 miles and transporting natural gas, NGLs, crude oil, refined products and petrochemicals. The partnership is also expected to have generated stable cash flows, with storage capacity of more than 300 million barrels for NGLs, crude oil, petrochemicals and refined products.

The Zacks Consensus Estimate for Enterprise Products' crude oil Pipelines & Services revenues is pegged at $4,960 million, suggesting a decline from the $5,026 million recorded a year ago. The Zacks Consensus Estimate for the gross operating margin from Enterprise Products' crude oil Pipelines & Services business segment is pegged at $384 million, indicating a fall from the $417 million recorded a year ago.

The Zacks Consensus Estimate for the gross operating margin from Enterprise Products' NGL Pipelines & Services business segment is pegged at $1,428 million, implying a dip from the $1,548 million recorded a year ago. This is likely to have affected Enterprise Products’ performance in the fourth quarter.

EPD’s Price Performance & Valuation

The EPD stock has lost 1.6% over the past year compared with the 10.2% decline of the composite stocks belonging to the industry. Meanwhile, Kinder Morgan, Inc. (KMI - Free Report) and Enbridge Inc. (ENB - Free Report) , two other leading midstream energy players, have gained 7.8% and 8%, respectively.

1-Year Price Chart

 

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EPD appears relatively undervalued, suggesting the potential for price increases. The partnership's current trailing 12-month enterprise value/earnings before interest, tax, depreciation and amortization ratio is 10.73 compared with the industry average of 10.91, reflecting that it is trading at a discount.

 

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Investment Thesis of EPD

Enterprise Products has low exposure to volume and commodity price risks. This is because its midstream assets are contracted by shippers for the transportation of natural gas, NGLs, crude oil, refined products and petrochemicals over extended periods. Thus, the partnership will continue generating stable fee-based revenues. EPD will secure additional cash flows since it has $5.1 billion of approved key projects under construction.

In addition to increasing its distribution for over two decades, the partnership boasts a strong credit rating. It also returns capital to unitholders through a unit buyback program. As part of its $2-billion repurchase plan, the leading midstream energy player has already utilized nearly 60% of the authorized program. As growth spending peaks in 2025 and falls to about $2.2-$2.5 billion in 2026, more free cash flow is used for buybacks, boosting per-unit cash flow rather than the balance sheet. (See the Zacks Earnings Calendar to stay ahead of market-moving news.)

Are ENB & KMI’s Business Models Stable?

Like EPD, the business models of Kinder Morgan and Enbridge are backed by stable fee-based revenues.

Kinder Morgan’s position as a leading midstream service provider is reinforced by a network of pipeline and storage assets that operate under long-term take-or-pay contracts. These contracts ensure that shippers pay for the capacity reserved, whether they utilize it or not, which provides a steady stream of revenues. This structure allows KMI to generate stable earnings, primarily insulated from fluctuations in the volume of natural gas transported, offering significant stability to its bottom line.

Similarly, Enbridge benefits from the long-term, fee-based nature of its midstream operations. Its pipelines transport 20% of the total natural gas consumed in the United States. The company generates stable, fee-based revenues from these midstream assets, as they are booked by shippers on a long-term basis, minimizing commodity price volatility and volume risks.

Adding to its stability, ENB will generate incremental cash flows from its C$37-billion backlog of secured capital projects, which include liquids pipelines, gas transmission, gas distribution and storage and renewables. The company expects to spend C$8 billion in 2026.

Last Word

Enterprise Products remains a solid income-oriented investment, backed by stable, fee-based midstream operations and long-term contracts that limit commodity price and volume risks. While near-term earnings are expected to decline year over year, and our model does not point to an earnings beat this quarter, valuation support and cash flow visibility provide downside protection.

With more than two decades of distribution growth, a strong balance sheet, active unit buybacks and additional cash flows expected from projects under construction, EPD offers reliable long-term returns. If you are a conservative investor who prioritizes stability and steady income over short-term earnings gains, this is an attractive time to invest in the stock.


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