ExxonMobil Holdings Corporation (XOM Quick QuoteXOM - Free Report) and Enterprise Products Partners LP (EPD Quick QuoteEPD - Free Report) are two well-known names in the energy sector with completely different business operations.

ExxonMobil is an integrated energy company with operations spanning exploration and production activities, refining, chemicals and specialty products. The integrated nature of the business shields it from the extreme volatility in energy markets and enables it to sustain profitability across business cycles.

Enterprise Products, on the other hand, operates an integrated, midstream asset network for the transportation and storage of crude oil, natural gas, natural gas liquids (NGLs), petrochemicals and refined products. The partnership’s midstream assets connect suppliers from some of the largest basins in the United States, Canada and the Gulf of America with various domestic and international markets. EPD also has a large pipeline of growth projects under construction that should enhance its earnings and cash flow visibility.

Over the past year, XOM shares have rallied 51.1%, outperforming EPD’s 28.9% gain. Price performance alone does not fully indicate a stock’s attractiveness or strength, as it merely reflects investor sentiment across market cycles. Hence, it is necessary to assess the fundamentals and broader operating environment of both stocks before arriving at an investment decision.

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High-Quality Assets & Favorable Energy Markets Boost XOM’s Prospects

ExxonMobil Holdings derives a major part of its revenues from its upstream operations. The company’s high-quality upstream assets remain a fundamental strength that supports its earnings and profitability. XOM’s upstream growth engines include its massive Permian Basin footprint and its assets offshore Guyana. The company continues to invest in production growth from these advantaged upstream assets, which are characterized by low production costs and a lower emissions profile. Notably, XOM expects its Permian production to reach 2.5 million oil equivalent barrels per day (Moebd) by the end of this decade, while total production is anticipated to reach 5.5 Moebd.

The current business environment also looks favorable for the company. The conflict in the Middle East and shipping disruptions through the Strait of Hormuz are keeping oil prices relatively high. West Texas Intermediate  crude is currently trading above $80 per barrel, according to oilprice.com, which could benefit the company’s upstream business. Moreover, XOM’s refining business also has a positive outlook at present. Tight refined product inventories and constrained refining capacity globally are expected to support strong refining margins and product prices in the near term, aiding XOM’s profitability. While XOM’s performance remains sensitive to the commodity pricing environment, its strong liquidity position and healthy balance sheet enhance its ability to weather volatility and market cycles effectively.

Strong Cash Flow Visibility & Growth Investments Support EPD

Enterprise Products operates an integrated midstream network that includes over 50,000 miles of pipelines, more than 300 million barrels of liquids storage capacity, 46 natural gas processing trains and more. The partnership generates stable fee-based revenues, which implies that its earnings are less vulnerable to fluctuations in commodity prices. This enables EPD to generate predictable cash flows across business cycles that support distribution growth. Additionally, the partnership has highlighted that almost 90% of its long-term contracts include an escalation provision that protects its cash flows and distributions under inflationary business environments.

The partnership currently has nearly $6.5 billion of major projects under construction, including new gas-processing plants in the Permian Basin, the Bahia pipeline expansion, Fractionator 15 and the Enterprise Hydrocarbons Terminal LPG expansion. These growth capital projects are tied to rising U.S. energy and NGL production, particularly in the Permian Basin. These projects are expected to come online between 2026 and 2029 and contribute to Enterprise’s earnings and cash flow growth. Additionally, EPD has other expansion projects under construction, which should enhance its ability to collect, transport and export hydrocarbons. The partnership also maintains its focus on returning capital to unitholders and reducing debt to strengthen its balance sheet.

Image Source: Enterprise Products Partners L.P.

Valuation Snapshot

Considering the valuation snapshot, it has become evident that ExxonMobil Holdings is currently trading at a discount compared with Enterprise Products Partners. This is reflected in the fact that XOM trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 9.16X, below EPD’s 10.96X.

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XOM vs EPD: Final Verdict

XOM and EPD have contrasting business models and, as a result, different strengths. ExxonMobil offers stronger upside potential in the current environment as high crude prices are expected to enhance upstream profitability. Moreover, constrained refining capacity is anticipated to support refining margins, which should benefit the company’s Energy Products segment. Meanwhile, Enterprise Products provides greater business stability through contracted and predictable cash flows but may not benefit as much from the current market volatility.

Overall, ExxonMobil currently emerges as the more compelling investment between the two stocks due to a favorable commodity pricing environment, production growth from its advantaged assets in Guyana and the Permian, a higher price rally and a relatively cheaper valuation. Both XOM and EPD currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.