EPD Advances Backlog of Growth Projects: Will This Boost Margins?

Enterprise Products Partners EPD is rapidly advancing its $7.6-billion capital project slate, with $6 billion in assets expected to enter service in 2025. The major infrastructure projects include two Permian gas processing plants (Orion and Mentone West), the Bahia NGL pipeline, Frac 14 at Mont Belvieu and the Neches River export terminal. These projects are likely to add substantial throughput capacity and revenue-generating capability. The partnership stated that several assets are already substantially contracted or backed by firm commitments.

EPD has organized its business to generate a significant portion of its revenues from fixed-fee contracts. This will provide a stable cash flow base and insulate the partnership from the inherent volatility of commodity prices, particularly oil.

In the last reported quarter, approximately 80% of the partnership’s gross operating margin came from fee-based sources. This model cushions the partnership from short-term fluctuations in commodity prices and is a core reason for EPD to be able to consistently grow its distributions for 26 consecutive years, even during turbulent market cycles.

In its first-quarter earnings call, the partnership disclosed that a significant portion ($1.8-$1.9 billion) of its planned 2026 capital expenditure has already been allocated to completing projects that have received clearance. These projects have cleared the Final Investment Decision stage, signaling that construction is underway and the company is fully committed to their completion.

Hence, even if EPD’s market conditions deteriorate, it will face significant difficulty in scaling back or postponing this spending, posing a substantial risk to the midstream energy giant’s operations.

Are KMI & MPLX’s Project Pipelines Driving Growth?

Kinder Morgan KMI reported a project backlog of $8.8 billion for the first quarter of 2025, with more than $7.4 billion tied to natural gas infrastructure. Around 20% of the backlog is expected to go into service through the remainder of 2025. KMI plans to spend $2.5 billion annually on capital projects, going forward.

Then again, MPLX LP MPLX has outlined a robust project backlog as part of its 2025 capital program, committing $1.7 billion toward growth initiatives. Notably, 85% of this investment is dedicated to Natural Gas and NGL Services. These developments are concentrated in key basins such as the Permian, Marcellus and Utica, which are central to MPLX's long-term growth and export strategies.

EPD’s Price Performance, Valuation & Estimates

EPD units have gained 5.6% over the past year, outpacing 4.6% growth 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 10.18X. This is below the broader industry average of 11.45X.

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

EPD currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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