Why Enterprise Is Poised for Higher Discretionary Cash Flows in 2026

Enterprise Products Partners LP EPD, a well-known name in the midstream energy landscape, earns consistent fee-based income from its extensive portfolio of pipeline and storage assets. The partnership owns a pipeline network spanning more than 50,000 miles, transporting crude oil, natural gas, natural gas liquids and refined products. EPD’s midstream business shields it from commodity price volatility, which results in stable cash flow generation.

Notably, on its recent earnings call, Enterprise has mentioned that 2026 is expected to mark an inflection point for incremental free cash flows, as the partnership has completed a long four-year cycle of large investments aimed at expanding its midstream network in the Permian and Haynesville basins. With many of its large projects nearing completion, such as the Bahia NGL pipeline and Neches River Terminal, the partnership expects organic growth capital expenditures to decline toward a mid-cycle range of approximately $2-$2.5 billion annually. This moderation in capital spending is anticipated to drive higher discretionary free cash flows, which the partnership plans to use for retiring debt and raising unit buybacks.

KMI & WMB Also Have Stable Business Models

Kinder Morgan Inc. KMI is a leading midstream energy company that operates the biggest natural-gas pipeline system in the United States. It has about 58,500 miles of major pipelines, 7,500 miles of gathering lines and over 700 bcf of gas storage. 

The Williams Companies, Inc. WMB is another leading player in the midstream energy sector, which operates a widespread pipeline system of more than 33,000 miles, including the Transco and Northwest Pipeline systems. These pipeline systems are among the largest natural gas transportation networks in the United States and are anticipated to benefit from the rising natural gas demand.

Both companies generate stable fee-based earnings, resulting in stable cash flows.

EPD’s Price Performance, Valuation & Estimates

Units of Enterprise Products have jumped 5.2% over the past year against the 7.3% decline 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 10.48X. This is below the broader industry average of 10.52X.

The Zacks Consensus Estimate for EPD’s 2025 earnings has not seen any revisions over the past seven days.

EPD, KMI and WMB each currently carry 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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This article originally published on Zacks Investment Research (zacks.com).

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