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Enterprise Products: An Inflation-Protected Bargain for Income Seekers?
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Key Takeaways
{\"0\":\"Enterprise Products trades at a discount to peers with EV/EBITDA of 10.29X versus higher industry averages.\",\"1\":\"EPD\'s $6B capital projects and inflation-linked contracts support stable and growing cash flows.\",\"2\":\"Strong export gateways and refinery access give EPD a competitive moat despite LPG margin challenges.\"}
Enterprise Products Partners LP (EPD - Free Report) trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 10.29X, which is below the broader industry average of 10.67X. Notably, EnbridgeInc. (ENB - Free Report) and Kinder Morgan, Inc. (KMI - Free Report) , two other midstream energy majors, currently trade at a trailing 12-month EV/EBITDA of 15.65X and 14.04X, respectively.
Image Source: Zacks Investment Research
Since the partnership’s business model is mostly inflation-protected and could be attractive for income seekers, should investors bet on the undervalued EPD stock now? Before getting into the investment conclusions, let’s analyze the integrated midstream energy giant’s fundamentals.
Enterprise Products' 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, EPD’s business model 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 will be able to safeguard its cash flow generation in all business scenarios.
EPD is also expected to generate incremental cash flows from its $6 billion worth of key capital projects, comprising the Bahia pipeline, fractionator 14 and others, which are either in service or set to come online.
EPD’s International Gateways & Critical Pipeline Create Moat
Through its extensive and integrated export network, the partnership has gained a formidable competitive advantage. This reflects EPD’s strategic investments in facilities that comprise the new Neches River terminal, expanded export capacity of ethylene at Morgan's Point, along with the upgraded loading docks of LPG at its EHT facility. Thus, through its critical midstream infrastructure, as mentioned on the second-quarter 2025 earnings call, EPD will be able to ship huge fuel products to key international markets.
EPD’s pipeline network is also connected to almost all of the ethylene plants in the domestic market, creating a solid moat for the partnership. Mentioned in the call, the midstream assets of Enterprise Products are also getting access to almost 90% of the refineries located in the eastern Rockies, thereby commanding a strong midstream presence.
Should Investors Bet on EPD?
Although Enterprise Products’ debt-to-capitalization is 52.3%, it still has a solid credit rating in the midstream energy space. While Enbridge’s debt-to-capitalization is 59.7%, Kinder Morgan’s debt-to-capitalization is 50.5%.
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Given all the positives, Enterprise Products has jumped 16.6% over the past year, outperforming the industry’s 6.5% growth. However, EPD underperformed ENB and KMI, which surged 28.7% and 33.2%, respectively, over the same time frame.
Image Source: Zacks Investment Research
One of the key concerns hurting Enterprise Products is the declining margin in the Liquefied Petroleum Gas (LPG) export business. Hence, investors shouldn’t bet on the stock right away. However, those who have already invested can stick to their investment. EPD 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: An Inflation-Protected Bargain for Income Seekers?
Key Takeaways
Enterprise Products Partners LP (EPD - Free Report) trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 10.29X, which is below the broader industry average of 10.67X. Notably, EnbridgeInc. (ENB - Free Report) and Kinder Morgan, Inc. (KMI - Free Report) , two other midstream energy majors, currently trade at a trailing 12-month EV/EBITDA of 15.65X and 14.04X, respectively.
Since the partnership’s business model is mostly inflation-protected and could be attractive for income seekers, should investors bet on the undervalued EPD stock now? Before getting into the investment conclusions, let’s analyze the integrated midstream energy giant’s fundamentals.
EPD’s Inflation-Protected Contracts & $6 Billion Key Projects
Enterprise Products' 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, EPD’s business model 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 will be able to safeguard its cash flow generation in all business scenarios.
EPD is also expected to generate incremental cash flows from its $6 billion worth of key capital projects, comprising the Bahia pipeline, fractionator 14 and others, which are either in service or set to come online.
EPD’s International Gateways & Critical Pipeline Create Moat
Through its extensive and integrated export network, the partnership has gained a formidable competitive advantage. This reflects EPD’s strategic investments in facilities that comprise the new Neches River terminal, expanded export capacity of ethylene at Morgan's Point, along with the upgraded loading docks of LPG at its EHT facility. Thus, through its critical midstream infrastructure, as mentioned on the second-quarter 2025 earnings call, EPD will be able to ship huge fuel products to key international markets.
EPD’s pipeline network is also connected to almost all of the ethylene plants in the domestic market, creating a solid moat for the partnership. Mentioned in the call, the midstream assets of Enterprise Products are also getting access to almost 90% of the refineries located in the eastern Rockies, thereby commanding a strong midstream presence.
Should Investors Bet on EPD?
Although Enterprise Products’ debt-to-capitalization is 52.3%, it still has a solid credit rating in the midstream energy space. While Enbridge’s debt-to-capitalization is 59.7%, Kinder Morgan’s debt-to-capitalization is 50.5%.
Given all the positives, Enterprise Products has jumped 16.6% over the past year, outperforming the industry’s 6.5% growth. However, EPD underperformed ENB and KMI, which surged 28.7% and 33.2%, respectively, over the same time frame.
One of the key concerns hurting Enterprise Products is the declining margin in the Liquefied Petroleum Gas (LPG) export business. Hence, investors shouldn’t bet on the stock right away. However, those who have already invested can stick to their investment. EPD currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.