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Why EPD's Inflation-Linked Business Model Supports Stable Cash Flows
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Key Takeaways
EPD's 50,000-mile pipeline network and 300M barrels of storage underpin steady cash flows.
EPD says 90% of long-term contracts boost fees in inflationary conditions, protecting cash flows.
EPD expects incremental cash flows from billions in capital projects already in service or set to come online.
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.
The business model of Enterprise Products is 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 is also expected to generate incremental cash flows from its billions of dollars’ worth of key capital projects, 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 26.1% over the past year as compared to the 19.4% improvement of the composite stocks belonging to the industry.
Image Source: Zacks Investment Research
From a valuation standpoint, EPD trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 11.86X. This is below the broader industry average of 12.13X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for EPD’s 2026 earnings has seen upward estimate revisions over the past seven days.
View the Zacks #1 Rank List
Image: Bigstock
Why EPD's Inflation-Linked Business Model Supports Stable Cash Flows
Key Takeaways
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.
The business model of Enterprise Products is 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 is also expected to generate incremental cash flows from its billions of dollars’ worth of key capital projects, 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 26.1% over the past year as compared to the 19.4% improvement of the composite stocks belonging to the industry.
From a valuation standpoint, EPD trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 11.86X. This is below the broader industry average of 12.13X.
The Zacks Consensus Estimate for EPD’s 2026 earnings has seen upward estimate revisions over the past seven days.
Enterprise Products currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.